Mar 31, 2023
The Directors are pleased to present the 14th Annual Report together with the Audited Statement of Accounts for the year ended 31st March 2023 of Kirloskar Oil Engines Limited (âKOELâ or the âCompanyâ).
1. COMPANYâS FINANCIAL PERFORMANCE
Your Company posted sales of H 4,073.04 Crore, an increase of 25% as compared to the previous year of H 3,267.59 Crore. Profit before tax and exceptional item was H 364.14 Crore as against H 210.05 Crore in the previous year.
The Profit After Tax was H 270.25 Crore as against H 208.01 Crore in the previous year.
2. FINANCIAL RESULTS (STANDALONE)
(Rs. in Crore) |
||
Particulars |
2022-23 |
2021-22 |
Total Income |
4,143.45 |
3,324.42 |
Profit before exceptional items and tax |
364.14 |
210.05 |
Exceptional Items |
- |
52.65 |
Profit before tax |
364.14 |
262.70 |
Tax Expense (Current & Deferred Tax) |
93.89 |
54.69 |
Net Profit for the Period |
270.25 |
208.01 |
Other Comprehensive Income |
(8.93) |
3.06 |
Total Comprehensive Income for the year, net of tax |
261.32 |
211.07 |
Profit Brought Forward |
1,495.65 |
1,345.31 |
Profit Available for Appropriation |
1,765.90 |
1,553.32 |
Transfer to General Reserve |
- |
- |
Dividend and Dividend Distribution Tax |
72.34 |
57.84 |
Balance of the Profit carried forward |
1,687.15 |
1,495.65 |
The Directors have declared an interim dividend of 125% (H 2.5/- per share) and also recommended a final dividend of 125 % (H 2.5/- per share) for the year ended 31st March 2023. (Previous Year Interim Dividend 75%, H 1.50/- per share and Final Dividend 125%, H 2.50/- per share).
Total dividend payout for the financial year was H 72.34 Crore. The payment of dividend subject to deduction of TDS at the applicable tax rate.
In terms of Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 including amendments thereunder, the Dividend Distribution Policy of the Company is available on the Company''s website fhttps://www.kirloskaroilengines.com/documents/541738/0a36d92a-4450-1010-8a11-d92ec5426c7c).
4. DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS
Pursuant to SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, (the Regulations) including amendments thereunder:
a) Details of Key Financial Ratios of the Company as under:
Sr. No. |
Particulars |
Ratio as on 31st March 2023 |
Ratio as on 31st March 2022 |
Reason for change |
Debtors'' Turnover* |
9.5 |
8.7 |
Higher sales growth |
|
ii. |
Inventory Turnover* |
7.2 |
8.1 |
Higher inventory for sales in next quarter |
iii. |
Interest Coverage Ratio |
84.8 |
55.5 |
Higher EBIT with lower finance cost |
iv. |
Current Ratio* |
1.4 |
1.8 |
Higher inventory for sales in next quarter |
v. |
Debt Equity Ratio* |
0.03 |
0.05 |
Lower Borrowings |
vi. |
Operating Profit Margin (%) |
8. 4% |
5.8% |
Better price realisations from customers resulting to improved operating margins |
vii. |
Net Profit Margin (%)* |
6.6% |
6.4% |
Improved operating margins partially offset by exceptional gain in previous year |
* Calculated in accordance with the Guidance Note issued on Division II - Ind AS Schedule III of the Companies Act, 2013 issued by ICAI. |
||||
There are no sector specific equivalent ratios for disclosure by the Company. |
b) Return on Net Worth: Details of change in Return on Net Worth as compared to the immediately previous Financial Year as follows: |
||||
Sr. |
As on 31st |
As on 31st |
||
No. |
Particulars |
March 2023 |
March 2022 |
% of change Reason for change |
1 |
Return on Net worth |
12.1% |
10.1% |
19.8% Improved operating margin with good sales growth |
5. SUBSIDIARY COMPANY AND CONSOLIDATED FINANCIAL STATEMENTS
On consolidated basis for the year ended 31st March 2023, your Company posted Revenue from Operations of H 5,023.80 Crore (Previous year H 4,021.98 Crore), Profit before tax and exceptional item was H 448.93 Crore (Previous year H 231.88 Crore) and Profit After Tax was H 331.65 Crore (Previous year H 170.87 Crore).
The consolidated financial statements of the Company and its subsidiaries, prepared in accordance with IND-AS 110, issued by Ministry of Corporate Affairs, forms part of this Annual Report. A statement containing the salient features of the financial statements of the subsidiary company forms part of the Financial Statements of the Company in Form AOC-1.
Pursuant to the provisions of Section 136 of the Companies Act, 2013 & Rules thereof including amendments thereunder, the financial statements along with relevant documents of the Company and its subsidiary are available on the Company''s website.
The annual accounts of the subsidiary and related detailed information will be available for inspection in electronic form based on the members'' request raised by them on the dedicated email id of the Company at [email protected].
a) The details of financial performance of subsidiaries including step down subsidiaries and associate company of subsidiary as on 31st March 2023 are as under:
Sr. |
Name of the Company |
Category |
Turnover / Revenue J in Cr.) |
Profit after Tax J in Cr.) |
||
No. |
FY 2022-23 |
FY 2021-22 |
FY 2022-23 |
FY 2021-22 |
||
1 |
Kirloskar Americas Corporation, USA (earlier known as KOEL Americas Corporation - KAC) |
Subsidiary Company |
28.62 |
30.27 |
1.37 |
2.00 |
2 |
La-Gajjar Machineries Private Limited, Ahmedabad (LGM) |
Subsidiary Company |
538.69 |
531.98 |
7.88 |
(3.88) |
3 |
Arka Financials Holdings Private Limited, Mumbai (AFHPL) |
Subsidiary Company |
0.39 |
0.00 |
(0.28) |
(2.57) |
4 |
Optiqua Pipes and Electricals Private Limited, Ahmedabad (OPEPL) |
Step-down Subsidiary Company |
43.44 |
38.96 |
(3.17) |
(1.84) |
5 |
Arka Fincap Limited, Mumbai (AFL) |
Step-down Subsidiary Company |
370.66 |
201.72 |
61.36 |
32.52 |
6 |
Arka Investment Advisory Services Private Limited, Mumbai (AIASPL)1 |
Step-down Subsidiary Company |
- |
- |
(0.13) |
- |
7 |
ESVA Pumps India Private Limited, Coimbatore (ESVA)2 |
Associate Company of OPEPL |
101.04 |
55.62 |
3.03 |
1.44 |
*AIASPL was incorporated on 30th March 2022, as wholly owned subsidiary of AFHPL and there were 31st March 2023. ** ESVA became Associate Company from 4th October 2021. |
no commercial operations carried |
out as on |
⢠KAC suffered an overall de-growth as compared to the Financial Year 2021-22 due to setbacks in the Power Generation business. However, contributions of the other segments viz. Firefighting, industrial and Customer support augur well for the future.
⢠KAC continued with its product development plans of 2 models of EPA Tier IV engines.
⢠During the financial year 2022-23, KOEL had acquired 24% equity stake of LGM as per the Shareholders'' Agreement including amendments thereof. Consequent to this, LGM is now a Wholly Owned Subsidiary of KOEL.
⢠LGM purchased the new land situated in Sanand GIDC, Ahmedabad, Gujarat, for its long-term strategy of consolidation of all the manufacturing facilities. LGM is in process of setting up of manufacturing facilities at said location. This project of setting up of new manufacturing facilities will be funded through a combination of long term bank borrowings, unsecured loan from parent company and internal accruals.
⢠LGM continued to expand its network both in domestic and international markets and geographies. In this Financial Year, LGM reported highest exports of H 152.7 Cr. LGM continued to expand its footprint in new geographical regions viz. South Africa, South East Asia and Latin America. LGM continued to focus on quality standards.
⢠The focus is to expand product basket by way of new product development.
iii. Optiqua Pipes and Electricals Private Limited
(âOPEPLâ) - Step Down Subsidiary
⢠During the financial year 2022-23, there was a volatility in the commodity rates of raw materials for the products of OPEPL. These prices of the products are directly linked to movement in the rates of the major Raw Materials i.e. Copper in case of Wires & Cables and PVC Resin in case of Pipes, which covers the major sales of the Company. Volatility in major raw materials resulted in high pressure on the margins, impact of which was observed in the overall bottom line of the Company for the current period.
⢠Going forward, to reduce the impact of such commodity price volatility, for its major customers, company is entering into back-to-back arrangements with its raw material suppliers, wherever possible.
⢠AFHPL was incorporated with an objective to enhance the strategic flexibility to build vibrant robust platform for the financial services business.
⢠Currently, AFHPL has 2 subsidiaries namely; Arka Fincap Limited and Arka Investment Advisory Services Private Limited.
⢠During the year under review the Company invested H 179.60 Crore towards Rights Issue of AFHPL, increasing Equity Capital from H 837.00 Crore to H 1016.60 Crore including securities premium.
v. Arka Fincap Limited (âAFLâ) - Step Down Subsidiary
⢠AFL operates in four principal lines of business viz. Corporate Lending, Real Estate and Urban Infra Financing, Syndication, MSME and Personal Lending. In line with the objective of âdelivering technology-enabled, creative and personalised financial solutions for an enhanced customer experience,'' AFL views technology as the primary enabler for business growth.
⢠Corporate Lending division designs lending solutions to medium and large corporations by providing them bespoke loans to meet specific requirements of their business. AFL offers customised solutions to meet their fund requirements across diverse sectors ranging from pharmaceuticals, renewable energy, power, telecom, entertainment, industrials, auto components and others.
⢠Real estate and Urban Infra Lending gives a partial or whole capital infusion to help India''s infrastructure and real estate development. The focus is on the needs of the prestigious clients guarantees a seamless procedure from beginning to end.
⢠The MSME division continues to grow across three products, which includes Secured Business Loan, Supply Chain Finance, and Personal Loans. AFL also entered into partnerships for co-lending with other smaller NBFCs and with various other fintech companies to widen its market reach and gain maximum customers from the market.
⢠Syndication business of AFL provides holistic solutions to corporate clients for project finance, capital expenditure, general corporate requirements, last mile financing, subordinated structured debt through advisory / syndicating / sell down and colending strategies across sectors. The syndication business aids in maintaining investor and client relationships.
The disclosures as required under Companies (Share Capital and Debentures) Rules, 2014, including amendments thereunder as on 31st March 2023 is as under: |
|
Options granted during the financial year 2022-23 |
2,75,000 |
Options vested during the financial year 2022-23 |
1,53,236* |
Options exercised during the financial year 2022-23 |
1,36,970** |
The total number of shares arising as a result of exercise of option during the year 2022-23 |
1,29,776 |
Options lapsed during the year 2022-23 |
1,37,369 |
Exercise Price |
103.14, 128.88,87.93 |
Variation of terms of options during the year 2022-23 Employee wise details of options granted to during FY 2022-23 : |
No variation |
1. Key Managerial Personnel: 2. Any other employee who receives a grant of options in any one year of option amounting to five percent |
Nil |
or more of options granted during the year 2022-23: |
40,000 |
a) Mr. Arvind Chabra |
40,000 |
b) Mr. T Parthasarathy |
30,000 |
c) Mr. Ajit Hardikar |
20,000 |
d) Mr. Ajay Saraf |
15,000 |
e) Mr. Nikhil Rao f) Mr Anand Dantale |
15,000 |
3. Identified employees who were granted option, during any one year, equal to or exceeding one percent of the issued capital (excluding outstanding warrants and conversions) of the Company at the time of grant during the year 2022-23. |
Nil |
* 9,425 options were vested to the specified employees of La-Gajjar Machineries Private Limited, a wholly owned subsidiary company and 1,43,811 options were vested to the specified employees of the Company as per vesting schedule. **It includes 1,571 options exercised during the financial year 2021-22 and allotted during the financial year 2022-23. |
Limited (âAIASPLâ) - Step Down Subsidiary
⢠AIASPL was incorporated with an objective including managing or assisting in raising funds for alternative investment funds, venture capital funds, private equity funds, debt funds, structured finance funds, offshore funds, pension funds, property related funds or any other funds, undertaking the business of providing investment advisory services, act as an asset manager, advisor, sponsor, designated partner in respect of various investment or pooled investment vehicles and/ or entities for managing and / or advising with respect to the assets / and / or investments of or by Alternative Investment Funds.
⢠Currently, AIASPL is an Investment Manager to Arka Credit Fund, a fund registered as a Category II Alternative Investment Fund with SEBI and its scheme i.e., Arka Credit Fund I.
6. KIRLOSKAR OIL ENGINES LIMITED - EMPLOYEE STOCK OPTION PLAN 2019 (KOEL ESOP 2019) -
The members of the Company at the Annual General Meeting of Kirloskar Oil Engines Limited held on 9th August 2019, passed a resolution for introducing Employees Stock Option Plan 2019 - (KOEL ESOP 2019), for the benefit of employees of the Company. The resolution also accorded approval to the Board of Directors, to formulate the plan as per broad parameters outlined in the resolution, either directly or through a Nomination and Remuneration Committee.
The Members of the Company at the Annual General Meeting of Kirloskar Oil Engines Limited held on 12th August 2021, passed a resolution amending the Kirloskar Oil Engines Limited - Employee Stock Option Plan 2019 in terms of coverage of the KOEL ESOP 2019 to the eligible employees of its subsidiary company, in or out of India except such subsidiary company(ies) which are formed and engaged in financial service business including without limitation to
the Arka Fincap Limited and also authorized the Board of Directors or the Nomination and Remuneration Committee of the Company to grant the Options to such employees of the Subsidiary Company(ies) from time to time.
The Securities and Exchange Board of India (âSEBIâ) notified the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 (âSEBI SBEB Regulationsâ) by repealing and merging the SEBI (Share Based Employee Benefits) Regulations, 2014 and the SEBI (Issue of Sweat Equity) Regulations, 2002 (collectively referred to as âErstwhile Regulationsâ) with appropriate modifications which came into force from 13th August 2021. The Nomination and Remuneration Committee in its meeting held on 27th October 2021 further amended the KOEL ESOP 2019 to align and comply with the requirements of the SEBI SBEB Regulations in order to bring flexibility provided under the SEBI SBEB Regulations.
The Company had obtained in-principle approval from BSE Limited (BSE) and National Stock Exchange of India Limited (NSE) for listing of 14,00,000 equity shares under KOEL ESOP 2019, pursuant to Regulation 12 of the Chapter II of the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014.
The Nomination and Remuneration Committee at its meetings held on 5th March 2021 approved the grant of 9,40,000 stock options exercisable into 9,40,000 Equity Shares of H 2/- each and on 18th May 2022 approved the grant of 2,75,000 stock options exercisable into 2,75,000 Equity Shares of H 2/- each of the Company to its specified employees of the Company. Further the Nomination and Remuneration Committee at its meeting held on 27th October 2021, approved the grant of 50,000 stock options exercisable into 50,000 Equity Shares of H 2/- each of the Company to the specified employees of La-Gajjar Machineries Private Limited, a wholly owned subsidiary company.
KOEL ESOP 2019 is in compliance with the applicable provisions of the Companies Act, 2013 and the Rules issued thereunder, the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 (âSEBI SBEB Regulationsâ) and other applicable regulations, if any.
There have been no material changes to the KOEL ESOP 2019 during the Financial Year.
The certificate from Mr. Mahesh J. Risbud, Practicing Company Secretary [PCS No. 185] Secretarial Auditors of the Company, confirming that the scheme has been implemented in accordance with the aforesaid regulations and in accordance with the resolution passed by the Members of the Company at its Annual General Meetings held on 9th August 2019 and 12th August 2021, will be placed before the Members at the ensuing Annual General Meeting. A copy of the same will be available for inspection at the Company''s website viz. www.kirloskaroilengines.com.
The disclosures on the scheme, details of options granted, changes to the scheme, if any, etc. are placed on the website of the Company as required under the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 (âSEBI SBEB Regulationsâ) and can be accessed on the Company''s website viz. https://www.kirloskaroilengines. com/emplovee-stock-option-plan.
In line with the Indian Accounting Standards (âInd ASâ) 102 on âShare Based Payments'' issued by the Institute of Chartered Accountants of India (âICAIâ), your Company has computed the cost of equity settled transactions by using the fair value of the options at the date of the grant and recognized the same as employee compensation cost over the vesting period.
The Company allotted 1,29,776 equity shares of H 2/- each to the eligible employees of the Company and eligible employees of La-Gajjar Machineries Private Limited during the Financial year 2022-23 pursuant to KOEL ESOP 2019. Consequent to the aforesaid allotment, Issued Capital and Subscribed Capital of the Company was increased from 14,46,14,326 equity shares of H 2/- each to 14,47,44,102 equity shares of H 2/- each and Paid-up Capital was increased from 14,46,13,861 equity shares of H 2/- each to 14,47,43,637 equity shares of H 2/- each.
The Company allotted 42,017 equity shares of H 2/- each on 16th May 2023, upon exercise of options vested to the eligible employees of the Company pursuant to KOEL ESOP 2019.
8. DIRECTORS
During the year under review,
i. The Members of the Company in the Annual General Meeting held on 11th August 2022, had approved the continuation of the appointment of Mr. Atul Kirloskar (DIN 00007387) as Whole Time Director with designation as the Executive Chairman of the Company to hold office till 31st March 2023 with retrospective effect from 26th January 2022. In compliance with Section 149, 152, 197 and other applicable provisions, if any of Companies Act, 2013 (the âActâ), including rules thereof and Regulation 17(1C) and other applicable provisions, if any of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, (âSEBI LODRâ) (including any statutory modification(s) or re-enactment thereof for the time being in force), based on the recommendation of the
Nomination and Remuneration Committee, the Board of Directors of the Company appointed Mr. Atul Kirloskar (DIN 00007387) as the Chairman and Non-Executive Director of the Company with effect from 1st April 2023 for a term of 1 (one) year, whose term of office as a Whole Time Director of the Company with designation as Executive Chairman ended on 31st March 2023. The members of the Company approved the said appointment by way of Postal Ballot on 19th April 2023.
ii. The Members of the Company in the Annual General Meeting held on 11th August 2022, had approved the re-appointment of Mr. Satish Jamdar (DIN 00036653) as âNon-Executive Independent Directorâ for a second term of 4 (four) consecutive years with effect from 4th August 2022.
iii. The Members of the Company in the Annual General Meeting held on 11th August 2022, had approved the appointment of Mrs. Purvi Sheth (DIN 06449636), as a âNon-Executive Independent Directorâ for a first term of 5 (five) consecutive years with effect from 19th May 2022.
iv. The Members of the Company in the Annual General Meeting held on 11th August 2022, had approved the appointment of Ms. Gauri Kirloskar (DIN 03366274) as a Whole Time Director with the designation as Managing Director of the Company for a term of 3 years with effect from 20th May 2022.
v. Mrs. Mrunalini Deshmukh (DIN 07092728) tendered her resignation as Independent Director of the Company due to pre-occupation with effect from 20th May 2022 vide resignation letter dated 19th May 2022. Further, the Company has received confirmation from Mrs. Mrunalini Deshmukh that there is no other material reason for her resignation other than those mentioned in her resignation letter dated 19th May 2022. The said confirmation was filed with BSE Limited and National Stock Exchange of India Limited on 19th May 2022.
vi. In compliance with Section 149 of the Companies Act, 2013 & Rules thereof including amendments thereunder and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 including amendments thereunder, based on the recommendation of the Nomination and Remuneration Committee, the Board of Directors of the Company appointed Mr. Arvind Goel (DIN 02300813), as an Additional Director of the Company in the capacity of âNon-Executive Independent Directorâ with effect from 19th May 2023. In accordance with Section 161 of the Companies Act, 2013 & Rules thereof including amendments thereunder, he will hold office of Director up to date of ensuing Annual General Meeting. The Company has received requisite notice in writing from a member proposing his
candidature for the office of Director. The resolution seeking approval of the Members by special resolution for the appointment of Mr. Arvind Goel for a first term of 5 (five) consecutive years, has been incorporated in the Notice of the forthcoming Annual General Meeting of the Company.
vii. Mr. M. Lakshminarayan (DIN 00064750) ceased to be Independent Director of the Company upon the expiry of second term of his re-appointment, with effect from 12th August 2022.
viii. Mr. Rahul Kirloskar (DIN 00007319) retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment.
The brief resumes and other details relating to the Directors who are proposed to be appointed/re-appointed, as required to be disclosed under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 including amendments thereunder, forms part of the Notice of Annual General Meeting.
i. Mr. Atul Kirloskar (DIN 00 007387), ceased to be Key Managerial Personnel of the Company, with effect from close of working hours of 31st March 2023.
ii. Ms. Gauri Kirloskar (DIN 03366274), the Managing Director of the Company, is appointed as the Key Managerial Personnel of the Company, with effect from 20th May 2022.
iii. Mr. Aseem Srivastav, the Chief Executive Officer (B2C) business vertical of the Company, is appointed as the Key Managerial Personnel of the Company, with effect from 20th May 2022.
iv. Mr. Rahul Sahai, the Chief Executive Officer (B2B) business vertical of the Company, is appointed as the Key Managerial Personnel of the Company, with effect from 1st September 2022.
v. Mr. Pawan Kumar Agarwal ceased to be Chief Financial Officer and Key Managerial Personnel of the Company, with effect from close of working hours of 15th September 2022.
vi. Mr. Anurag Bhagania, the Chief Financial Officer of the Company, is appointed as the Key Managerial Personnel of the Company, with effect from 22nd September 2022.
Other than the above, there are no other changes in Key Managerial Personnel of the Company in the Financial Year 2022-23.
The Company has received declarations from all the
Independent Directors of the Company confirming that
they meet the criteria of independence as prescribed
under Section 149 (7) of the Companies Act, 2013 & Rules thereof including amendments thereunder and Regulation 16(1)(b) & 25(8) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 including amendments thereunder.
The Company has also received declarations from all the Independent Directors of the Company confirming that they have complied with the Code for Independent Directors as prescribed in Schedule IV to the Companies Act, 2013 including amendments thereunder. The said Code is available on the Company''s website.
All the Independent Directors of the Company have enrolled themselves in the data bank with the âIndian Institute of Corporate Affairs'', New Delhi, India and eligible Independent Directors have also completed the proficiency test.
d) A statement regarding opinion of the Board with regard to Integrity, Expertise and Experience (including the proficiency) of the Independent Directors appointed during the year
The Board of Directors considered that Mrs. Purvi Sheth (DIN 06449636), Mr. Yogesh Kapur (DIN 00070038) and Mr. Satish Jamdar (DIN 00036653) possess the requisite expertise and experience (including the proficiency) and they are persons of high integrity and repute and accordingly recommended their appointment/re-appointment as Independent Director(s) which were approved by the Members in the Annual General Meeting held on 11th August 2022.
Other than the above, there were no other appointment / re-appointment of Independent Directors of the Company in Financial Year 2022-23.
e) Board Evaluation
The Board of Directors carried out a formal review of the performance and effectiveness of the Board, Committees of the Board and of the individual directors including the Chairman of the Board for the Financial Year 2022-23.
The performance of the Board was evaluated on the basis of criteria such as the board composition and structure, effectiveness of Board processes, participation in organization strategy including Long Range Plan and Annual Operating Plan, inorganic growth opportunity evaluation, Enterprise Risk Management etc.
Using appropriate criteria the performance of the various Committees was separately evaluated by the Board.
In a separate meeting of Independent Directors, performance of non-independent directors, performance of the Board as a whole, performance of the Chairman, taking into account the views of executive directors and non-executive directors, was evaluated and inter alia discussed the issues arising out of Committee Meetings and Board discussion including the quality, quantity and timely flow of information between the Company
Management and the Board that is necessary for the Board to effectively and reasonably perform their duties. The outcome of the meeting was presented to the Board along with the course of actions taken for implementing the observations.
A separate exercise was carried out to evaluate the performance of individual Directors including the Chairman of the Board, who were evaluated on parameters such as achievement against key performance objectives, attendance at meetings, time devoted for the Company, contribution in the Board process etc.
Feedback was sought by way of a structured questionnaire covering various aspects of the Board''s functioning such as adequacy of the composition of the Board and its Committees, Board culture, execution and performance of specific duties, obligations and governance and the evaluation was carried out based on responses received from the Directors.
The Independent Directors shared their inputs on effectiveness of the Board processes with the Chairman of the Board.
The Directors expressed their satisfaction with the evaluation process.
The result of evaluation was satisfactory and meets the requirements of the Company.
f) Nomination and Remuneration Policy
The Board of Directors, on the recommendation of the Nomination & Remuneration Committee, has adopted a policy that lays guidelines for selection and appointment of Directors, Key Managerial Personnel and Senior Management Personnel together with their remuneration. The Nomination and Remuneration Policy is available on the website of the Company. (Web - link https://www. kirloskaroilengines.com/documents/541738/2bd3cfb1-7d20-f25a-1163-3a003fd96c15)
g) Number of meetings of the Board
During the period under review, eight (8) Board Meetings were held, the details of which form part of the Report on Corporate Governance.
The Composition of Committees of the Board viz. Audit Committee, Nomination and Remuneration Committee, Risk Management Committee and Stakeholders Relationship Committee forms part of the Report on Corporate Governance.
The Composition of Corporate Social Responsibility Committee forms part of Annexure A of this report.
During the year under review, the Board has accepted all the recommendations given by the Committees of the Board, which are mandatorily required.
9. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS
During the year under review, the Company has invested in equity shares of Arka Financial Holdings Private Limited, Wholly Owned Subsidiary of the Company and 8.25% cumulative redeemable preference shares of La-Gajjar Machineries Private Limited, Wholly Owned Subsidiary of the Company. The details are given in the Financial Statements. The Company has not granted any Loans and Guarantees covered under Section 186 of the Companies Act, 2013 & Rules thereof including amendments thereunder.
10. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES
All related party transactions that were entered into during the Financial Year 2022-23 were on an arm''s length basis and in the ordinary course of business. Hence, there are no transactions to be reported in Form AOC-2. None of the related party transactions entered into by the Company, were materially significant, warranting members'' approval under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 including amendments thereunder. All Related Party Transactions are routinely placed before the Audit Committee for approval after being duly certified by the Independent Chartered Accountant. The Audit Committee had granted the omnibus approval for the proposed transactions other than those approved by the Audit Committee from time to time with Related Party during financial year 202223, which are reviewed on quarterly basis by the Audit Committee after being duly certified by the Independent Chartered Accountant.
The policy on Related Party Transactions was amended in order to cover the provision of omnibus approval by the Audit Committee and to align with the provisions of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Sixth Amendment) Regulations, 2021. The amended policy on Related Party Transactions is uploaded on the Company''s website.
The disclosures as per IND-AS 24 for transactions with related parties are provided in the Financial Statements of the Company.
11. RISK MANAGEMENT, INTERNAL AUDIT AND INTERNAL CONTROL FRAMEWORK
The Board recognizes the importance of sound internal controls and risk management practices to good corporate governance. The Board is responsible for the governance of risk and ensures that management maintains a sound system of risk management and internal controls, to safeguard the interests of the Company and its shareholders. All material decisions of the Board take into relevant consideration the nature and extent of risks which the Company is willing to take in achieving its strategic objectives and value creation.
In line with the commitment of a high standard of compliance with accounting, financial reporting, internal controls, corporate governance and auditing requirements and any legislation relating thereto, the Company has a Code of Business Conduct applicable to the Company personnel covering a wide range of business practices and procedures. This includes, but is not limited to, compliance with laws, rules and regulations, conflicts of interests, insider trading, competition and fair dealing, discrimination and harassment, health and safety, environmental matters, record-keeping, financial controls and disclosures, confidentiality, protection and proper use of company assets, financial reporting and compliance.
The Company''s internal control system is commensurate with the nature of the business, size and complexity of operations covering all businesses and functions of the organization. The internal control system maintains a repository of internal controls which is tested and updated through its internal audits to ensure that adequacy and effectiveness of all major internal controls.
A risk based audit plan on a yearly basis is approved by the Audit Committee. The audit plan covers all businesses and functions across all locations. Significant observations and progress of implementation of action plan are reported to and reviewed by the Audit Committee.
In addition to this, control self-assessment framework complements the internal audits and helps the employees to monitor the internal controls they are responsible for. This system aids in building robust control environment across the organization.
Both, the internal audit and control self-assessments processes are automated to promote efficient tracking of open audit issues without manual intervention.
The enterprise risks and their mitigation plans are presented by the risk owners to the Risk Management Committee. The Enterprise Risk Management (âERM'') framework is aimed at effectively mitigating the business and enterprise risks through strategic actions. The mitigation plans for enterprise and business risks are reviewed and updated on a periodic basis to the Risk Management Committee, Audit Committee and the Board of Directors of the Company.
The Company''s risk management process is designed to facilitate identification, evaluation, mitigation and review of risks which may affect achievement of objectives. It is aligned with the strategy deployment processes of the organization.
The Risk management process which has been established across the Company, addresses major types of risks, including cyber security, which are at enterprise and business level. The risks are reviewed with respect to the likelihood and impact following a balanced bottom-up and top-down approach covering all businesses and functions of the Company. The review of the risks is done based on changes in the external environment, which have a significant bearing on the risks.
The Risk Management Policy developed by the Company guides the risk management processes which is in line with size, scale and nature of the Company''s operations. The risk management process works at various levels across the organization. It is an ongoing process and forms an integral part of Management focus.
The Risk Management Committee oversees risk management standards, practices, and systems. The Risk Management Committee periodically reviews the effectiveness of the Enterprise Risk Management system within the Company and evaluates the adequacy and effectiveness of administrative, operating and accounting controls used by the Company.
The enterprise risks and mitigation plans are reviewed by the Risk Management Committee, Audit Committee and the Board of Directors periodically.
12. INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO THE FINANCIAL STATEMENTS
The Company has in place adequate internal financial controls with reference to the Financial Statements commensurate with the size, scale and complexity of its operations.
13. CORPORATE SOCIAL RESPONSIBILITY
The Company has always believed in working for the betterment and uplift of society. Corporate Social Responsibility (CSR) has been practiced and ingrained over the years in the Company. The focus areas under CSR have remained consistent over the years and include education, health and hygiene, environment, Disaster Management and Rural development etc.
The Company has adopted the Corporate Social Responsibility (CSR) policy which is further amended in lines with the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021.
The Composition of CSR Committee of the Board and Report on CSR activities is annexed herewith in Annexure A.
14. VIGIL MECHANISM / WHISTLE BLOWER POLICY
The Company has adopted a Vigil Mechanism / Whistle Blower Policy. The Policy provides a mechanism for all directors, employees of the Company and persons dealing with the Company to report to the Chairman of the Audit Committee or Ethics Committee or Ethics Ombudsman any instance of unethical behaviour, actual or suspected fraud or violation of the Company''s code of conduct or leakage of Unpublished Price Sensitive Information (UPSI), by any person, who is in possession of UPSI, to any other person in any manner whatsoever, except as otherwise permitted under the SEBI (Prohibition of Insider Trading) Regulations or any other instance. The e-learning and awareness on whistleblower policy is made available to the employees of the Company.
The Company adopted online Ethics Helpline to report any suspected violations of code of conduct or any other ethical concerns or raise concern under Whistle Blower / Vigil Mechanism, through email / hotline / webmode. The Company had a tie-up with an independent third party specialist service provider âIntegrity Mattersâ to handle concerns reported. Accordingly, during the year under review, the Vigil Mechanism / Whistle Blower Policy was amended which is uploaded on the Company''s website (weblink: https://www.kirloskaroilengines.com/documents/541738/ ec79ef3a-160a-ad2e-6156-55ed1c1058be)
No person has been denied access to the Audit Committee in this regard. There were no complaints filed / pending with the Company during the year.
15. EXTRACT OF ANNUAL RETURN
As required under Section 92(3) read with section 134(3) (a) of the Companies Act 2013 read with rule 12 of the Companies (Management and Administration) Rules, 2014 including amendments thereunder, the Annual Return filed with the Ministry of Corporate Affairs (MCA) for the Financial Year 2021-22 is available on the web-link (https://www. kirloskaroilengines.com/documents/541738/30cc4d8a-4519-756e-e845-e18927b655ac) and the Annual Return for Financial Year 2022-23 will be made available on the website of the Company once it is filed with the MCA.
16. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE AND OUTGO
Information relating to conservation of energy, technology absorption and foreign exchange earnings and outgo as required under section 134 (3)(m) of the Companies Act, 2013, and Rules thereof including amendments thereunder, are provided in Annexure B to this report.
17. PARTICULARS OF EMPLOYEES
Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 including amendments thereunder, are annexed in Annexure C of this report.
The particulars of employees pursuant to Section 197(12) of the Companies Act, 2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 including amendments thereunder, forms part of this report. In terms of Section 136 (1) of the Companies Act, 2013 & Rules thereof including amendments thereunder, the Directors'' report is being sent to the shareholders without this Annexure. A copy of this annexure will be made available in electronic form to the members on request raised by them on the dedicated email id of the Company at [email protected].
18. POLICY ON PREVENTION OF SEXUAL HARRASSMENT (POSH)
The Company has in place a Policy for prevention of sexual harassment at workplace. This inter alia provides a mechanism for the resolution, settlement or prosecution of acts or instances of Sexual Harassment at work and ensures that all employees are treated with respect and dignity. The Company has complied with the provisions relating to the constitution of internal complaints committee under the Sexual Harassment of Women at work place (Prevention, Prohibition and Redressal) Act, 2013.
Awareness programs are conducted on the POSH during the Financial Year 2022-23. Also, all new joinees at the Company undergo separate induction on POSH policy. Online modules and courses on POSH were carried out which included details of regulatory requirements, Incidents that constitutes sexual harassment, dealing with sexual harassment etc.
There were no complaints filed / pending with the Company during the year.
During Financial Year 2022-23:
a. There were no public deposits accepted by the Company pursuant to provisions of the Companies Act, 2013 & Rules thereof including amendments thereunder.
b. There was no instance of fraud during the year under review, which required the Statutory Auditors to report to the Audit Committee and / or Board under Section 143(12) of Act & Rules thereof including amendments thereunder.
c. The Company has maintained cost records as specified by the Central Government under sub-section (1) of section 148 of the Companies Act, 2013 & Rules thereof including amendments thereunder.
d. The Company has complied with all applicable mandatory Secretarial Standards issued by the Institute of Company Secretaries of India, New Delhi.
e. To the best of our knowledge, the Company has not received any such order from Regulators, Courts or Tribunals, which may impact the going concern status or the operations of the Company in future.
f. There have been no material changes and commitments, affecting the financial position of the Company which have occurred between the end of the Financial Year of the Company to which the Financial Statements relate and the date of this Report.
g. Neither any application has been made nor has any proceeding been pending against the Company under the Insolvency and Bankruptcy Code, 2016.
The members of the Company in their meeting held on 12th August 2021, appointed G.D. Apte, Chartered Accountants, Pune, (Firm Registration Number 100515W) as Statutory Auditors of the Company for a first term of 5 (five) consecutive years to hold office from Annual General Meeting held on 12th August 2021 till the conclusion of the Annual General Meeting to be held in the year 2026.
The Company has received from them the requisite certificate pursuant to Section 139 of the Companies Act, 2013 & Rules thereof including amendments thereunder.
The Report given by the Auditors on the Standalone and Consolidated financial statements of the Company for the Financial Year 2022-23 is part of this report. There are no qualifications, reservations, adverse remarks or disclaimer given by the Auditors in their report.
b) Cost Auditors
M/s. Parkhi Limaye & Co, Cost Accountants (Firm Registration No. 191) carried out the cost audit during the year. The Board of Directors has appointed M/s. Parkhi Limaye & Co. as Cost Auditors of the Company for the Financial Year 2023-24 as required under section 148 of the Companies Act, 2013 & Rules thereof including amendments thereunder.
The Board of Directors has appointed Mr. Mahesh J. Risbud, Practicing Company Secretary [PCS No. 185] to conduct Secretarial Audit of the Company under section 204 of the Companies Act, 2013 & Rules thereof including amendments thereunder.
The Secretarial Audit Report is annexed herewith in Annexure D-1.
There are no adverse remarks / qualifications of Secretarial Auditors in the Secretarial Audit Report for the year ended 31st March 2023.
Mr. Mahesh J. Risbud, Practising Company Secretary, Pune, has submitted Secretarial Compliance Report as laid down in SEBI Circular No. CIR/CFD/CMD1/27/2019 dated 8th February 2019 read with circular no. NSE/ CML/ 2023/21 dated 16th March 2023 and circular no. NSE/CML/ 2023/30 dated 10th April 2023 issued by National Stock Exchange of India Limited and notice no. 20230316-14 dated 16th March 2023 and notice no. 20230410-41 dated 10th April 2023 issued by BSE Limited (âCircularsâ), and has also confirmed that the Company has complied with of all applicable SEBI Regulations and circulars / guidelines issued thereunder, for the Financial Year 2022-23.
La-Gajjar Machineries Private Limited (LGM) and Arka Financial Holdings Private Limited (AFHPL) are material unlisted subsidiaries of the Company. The Secretarial Audit of LGM and AFHPL for the Financial Year 2022-23 were carried out pursuant to Section 204 of the Companies Act, 2013 & Rules thereof including amendments thereunder read with Regulation 24A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 including amendments thereunder. The Secretarial Audit Report of LGM has been submitted by Mr. Mahesh J. Risbud, Practicing Company Secretary, Pune, (FCS No.: 810 C.P. No.: 185) for the Financial Year 2022-23. The Secretarial Audit Report of AFHPL has been submitted by M/s. Mayekar and Associates, Practicing Company Secretaries, Mumbai, FCS - 2071, COP - 2427, Practicing Company Secretary for the Financial Year 2022-23.
The Secretarial Audit Reports are annexed herewith in Annexure D-2.
There are no adverse remarks / qualifications in the Secretarial Audit Reports of LGM and AFHPL for the Financial Year 2022-23.
21. MANAGEMENT DISCUSSION & ANALYSIS AND REPORT ON CORPORATE GOVERNANCE
The Management Discussion and Analysis and the Report on Corporate Governance as required under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, including amendments thereunder, forms part of this Annual report.
A Certificate from the Statutory Auditors of the Company regarding compliance with conditions of corporate governance as required under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, including amendments thereunder, also forms part of this Annual Report.
22. BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORT(BRSR)
Pursuant to Regulation 34 of SEBI (Listing Obligations and Disclosures Requirements) Regulations, 2015, including amendment thereunder, the Business Responsibility and Sustainability Report (BRSR) for Financial Year 2022-23 is forming part of this Annual Report.
23. DIRECTORSâ RESPONSIBILITY STATEMENT
Pursuant to Section 134 of the Companies Act, 2013, including rules made thereof and amendments thereunder, the Directors, based on the representations received from the Operating Management, confirm that:
a) In the preparation of the Annual Accounts, the applicable accounting standards have been followed and that no material departures have been made from the same;
b) They have 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 as at 31st March 2023 and of the profit of the Company for the year ended on that date;
c) They have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding assets of the Company and for preventing and detecting fraud and other irregularities;
d) They have prepared the annual accounts on a going concern basis;
e) They have laid down internal financial controls to be followed by the Company and such internal financial controls are adequate and operating effectively; and
f) They have devised proper systems to ensure compliance with provisions of all applicable laws and such systems are adequate and operating effectively.
Statements in this report, particularly those which relate to Management Discussion & Analysis, describing the Company''s objectives, projections, estimates and expectations may constitute âforward looking statementsâ within the meaning of applicable laws and regulations. Actual results may differ materially from those either expressed or implied.
On behalf of the Directors, I would like to extend our sincere gratitude to our shareholders, investor community, bankers and suppliers for their continuous support and commitment.
I would like to express my appreciation to the Board of Directors for their invaluable guidance, wisdom, and support in guiding the Company through this rather difficult year. I look forward to working with them to drive KOEL to greater heights in coming years.
For and on behalf of the Board of Directors
Sd/-
Date: 19th May 2023 Non-Executive Chairman
Place: Pune DIN: 00007387
The Firefighting segment contributed 52% of
the revenue. The Stocking and packaging of fire pump engines with base frames and other accessories within the USA have led to the business growth in the region.
Mar 31, 2022
The Directors are pleased to present the 13th Annual Report together with the Audited Statement of Accounts for the year ended 31st March 2022 of Kirloskar Oil Engines Limited (âKOELâ or the âCompanyâ).
1. COMPANYâS FINANCIAL PERFORMANCE
Your Company posted sales of Rs. 3,267.59 Crores, an increase of 23% as compared to the previous year of Rs. 2,663.62 Crores. Profit before tax and exceptional item was Rs. 210.05 Crores as against Rs. 239.77 Crores in the previous year.
The Profit After Tax was Rs. 208.01 Crores as against Rs. 169.74 Crores in the previous year.
2. FINANCIAL RESULTS (STANDALONE) |
(Rs. in Crores) |
|
Particulars |
2021-22 |
2020-21 |
Total Income |
3,324.42 |
2,718.92 |
Profit before exceptional items and tax |
210.05 |
239.77 |
Exceptional Items |
52.65 |
(8.37) |
Profit before tax |
262.70 |
231.40 |
Tax Expense (Current & Deferred Tax) |
54.69 |
61.66 |
Net Profit for the Period |
208.01 |
169.74 |
Other Comprehensive Income |
3.06 |
4.57 |
Total Comprehensive Income for the year, net of tax |
211.07 |
174.31 |
Profit Brought Forward |
1,345.31 |
1,192.73 |
Profit Available for Appropriation |
1,553.32 |
1,362.47 |
Transfer to General Reserve |
- |
- |
Dividend and Dividend Distribution Tax |
57.84 |
21.69 |
Balance of the Profit carried forward |
1,495.65 |
1,345.31 |
The Directors have declared an interim dividend of 75% (Rs. 1.50/- per share) and also recommended a final dividend of 125 % (Rs. 2.50/- per share) for the year ended 31st March 2022. (Previous Year Interim Dividend 75% , Rs. 1.50/- per share and Final Dividend 125%, Rs. 2.50/- per share).
Total dividend payout for the financial year was Rs. 57.84 Crores. The payment of dividend subject to deduction of TDS at the applicable tax rate.
In terms of Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 including amendments thereunder, the Dividend Distribution Policy of the Company is available on the Companyâs website (https://www.kirloskaroilengines. cnm/dncuments/541738/0a36d92a-4450-1010-8a11-d92ec5426c7c).
4. DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS
Pursuant to SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, (the Regulations) including amendments thereunder:
a) *Details of Key Financial Ratios of the Company as under: |
||
Sr. â . , Particulars No. |
Ratio as on 31st March 2022 |
Ratio as on Reason for significant change 31st March 2021 (more than 25%) |
i. Debtorsâ Turnover* |
8.7 |
7.4 - |
ii. Inventory Turnover* |
8.1 |
6.2 Higher sales with similar level of Inventories |
iii. Interest Coverage Ratio |
55.5 |
47.2 - |
iv. Current Ratio* |
1.8 |
1.7 - |
v. Debt Equity Ratio* |
0.05 |
0.04 - |
vi. Operating Profit Margin (%) |
5.8% |
7.9% Commodity price increase put pressure on operating margins |
vii. Net Profit Margin* (%) |
6.4% |
6.4% - |
* Calculated in accordance with the Guidance Note issued by ICAI on Ind AS and Schedule III of the Companies Act 2013. Previous year numbers are restated accordingly. There are no sector specific equivalent ratios for disclosure by the Company. b) Return on Net Worth: Details of change in Return on Net Worth as compared to the immediately previous Financial Year as follows: |
||
Reason for Sr. As on As on Particulars % of change significant change No. 31st March 2022 31st March 2021 more than 25% |
||
1 Return on Net worth |
10.1% |
8.9% 13.4% - |
5. SUBSIDIARY COMPANY AND CONSOLIDATED FINANCIAL STATEMENTS
On a consolidated basis for the year ended 31st March 2022, your Company posted Revenue from Operations of Rs. 4,021.98 Crores (Previous year: Rs. 3,296.10 Crores), Profit before tax and exceptional item was Rs. 231.88 Crores (Previous year: Rs. 278.05 Crores) and Profit After Tax was Rs. 170.87 Crores (Previous year: Rs. 197.40 Crores).
The consolidated financial statements of the Company and its subsidiaries, prepared in accordance with IND-AS 110, issued by Ministry of Corporate Affairs, forms part of this Annual Report. A statement containing the salient features of the financial statements of the subsidiary company is attached to the Financial Statements of the Company in Form AOC-1.
Pursuant to the provisions of Section 136 of the Companies Act, 2013 & Rules thereof including amendments thereunder, the financial statements along with relevant documents of the Company and its subsidiaries are available on the Companyâs website.
The annual accounts of the subsidiaries and related detailed information will be available for inspection in electronic form based on the membersâ request raised by them on the dedicated email id of the Company at [email protected].
a) The details of financial performance of subsidiaries including step down subsidiaries and associate company of subsidiary as on 31st March 2022 are as under: |
||||
Sr. Name of the Company Category No. |
Turnover / Revenue (Rs. in Crs.) |
Profit after Tax (Rs. in Crs.) |
||
FY 2021-22 |
FY 2020-21 |
FY 2021-22 |
FY 2020-21 |
|
1 Kirloskar Americas Subsidiary Corporation, USA (earlier Company known as KOEL Americas Corporation - KAC) |
30.27 |
28.24 |
2.00 |
0.53 |
2 La-Gajjar Machineries Subsidiary Private Limited, Company Ahmedabad (LGM) |
531.98 |
509.10 |
(3.88) |
19.51 |
3 Arka Financial Holdings Subsidiary Private Limited, Mumbai Company (AFHPL) |
0.00 |
(2.57) |
||
4 Optiqua Pipes and Step-down Electricals Private Limited, Subsidiary Ahmedabad (OPEPL) Company |
38.96 |
(1.84) |
0.00 |
Sr. Name of the Company Category No. |
Turnover / Revenue (Rs. in Crs.) |
Profit after Tax (Rs. in Crs.) |
||
FY 2021-22 |
FY 2020-21 |
FY 2021-22 |
FY 2020-21 |
|
5 Arka Fincap Limited, Step-down Mumbai (AFL) Subsidiary Company |
201.73 |
101.89 |
32.52 |
16.88 |
6 Arka Investment Advisory Step-down Services Private Limited, Subsidiary Mumbai (AIASPL) Company |
AIASPL was incorporated on 30th March 2022, as wholly owned subsidiary of AFHPL and there are no commercial operations carried out as on 31st March 2022. |
|||
7 ESVA Pumps India Private Associate Limited, Coimbatore Company (ESVA)1 of OPEPL |
55.62 |
1.44 |
||
* ESVA becomes Associate Company from 4th October 2021, |
, hence only current yea |
r Financials given in above table. |
b) Operational Highlights of subsidiaries including step down subsidiaries and associate company of subsidiary during FY 21-22 are as under:
i. Kirloskar Americas Corp., USA (previously known as
KOEL Americas Corp. - âKACâ)
⢠All the 4 intended engine models certified by Environment Protection Agency (EPA) were commercially available in the Financial Year 2021-22, however, the lack of engineering budgets and resources at the OEMs due to the pandemic, has affected the growth of these products. We expect the sales to pick up in FY2022-23.
⢠Two new engine families in the range <25hp segment were approved for EPA Tier 4 Final certification in this Financial Year. Now, the proto engines are under the phase of testing and validation. These new platform of engines will be a major growth driver in the coming years.
⢠The Companyâs efforts of exploring market for Natural gas engines in North America is also progressing well and expected to make it commercially viable in the later part of Financial Year 2022-23.
ii. La-Gajjar Machineries Private Limited (âLGMâ)
⢠In financial year 2021-22, the Company has acquired land for the purpose of the long-term strategy of consolidation of all the manufacturing facilities and completed the legal formalities for acquisition of land also. Considering the current situation wherein the manufactured output of the Company is at a lower capacity utilization, and profitability of the Company is under pressure, any further investments on the project plant consolidation is not recommended and therefore its being put on hold. This can be reviewed once the financial performance of the Company improves significantly and capacity utilization of the existing plant(s) nears its peak.
⢠Your Company continued to expand its network both in domestic and international markets and geographies.
⢠During the year under review, your company focusing on solar pump-sets business in KUSUM & JJM schemes through successful bidders.
⢠The business of pipes, cables & wires of M/s. Optiflex Industries, Partnership Firm, based in Ahmedabad, has been transferred (on a slump sale basis as a going concern) to the Company and accordingly the business operations commenced from 16th April 2021.
⢠OPEPL has commenced the business of manufacturing & sales of Winding Wires, Cables and Pipes in Quarter 1 of FY 2021-22 and added trading of Pump sets sales in Quarter 2 of FY 2021-22.
Mrs. C. Shanthi, OPEPL and ESVA Pumps India Private Limited based on the approval of the Board of Directors of OPEPL, for acquisition of 49% Equity Stake at a consideration as mutually agreed between OPEPL and Target Entity not exceeding Rs. 4.5 Crores. This acquisition was in view of business expansion & capacity securitization of mini mono bloc (MMB) pumps.
⢠Post completion of acquisition of 49% Equity stake, ESVA Pumps India Private Limited has become an âAssociate Company'' of OPEPL with effect from 4th October 2021 pursuant to Section 2(6) of the Companies Act, 2013 and rules made thereunder.
⢠The Company has promoted and incorporated a wholly owned subsidiary, namely, Arka Financial Holdings Private Limited on 13th July 2021 in order to enhance the strategic flexibility to build vibrant robust platform for the financial service business.
⢠During the year under review the Company invested Rs. 837 Crores towards Rights Issue of AFHPL, increasing Equity Capital to Rs. 837 Crores including securities premium.
⢠During the year under review the Company invested Rs. 50 Crores towards Rights Issue of AFL, increasing Equity Capital to Rs. 701.31 crores including securities premium.
⢠Further the members of the Company in the Annual General Meeting held on 12th August 2021 had given its consent to transfer all equity shares (including existing and proposed investment if any) having face value of Rs. 10/- each held by the Company in Arka Fincap Limited to Arka Financial Holdings Private Limited, in one or more tranches.
⢠Accordingly, the Company has transferred 685,422,231 equity shares of face value of Rs. 10/- each held in Arka Fincap Limited to Arka Financial Holdings Private Limited in tranches. Consequently, Arka Fincap Limited has become step down subsidiary of the Company instead of subsidiary company w.e.f. 4th March 2022.
⢠SME/MSME Lending: The SME division continued to grow on all three product fronts namely Loan Against Property, Supply Chain Finance and Unsecured Loans through digital lending. From 3 branches and ~15 people in the beginning of the year to 10 locations with over 60 people. Your Company also entered into partnerships for Colending with other
smaller NBFCs and with various other fintech to expand its market reach and acquire maximum customers from the market. Going forward, the SME division intends to grow robustly in the next financial year and the principal focus would be on secured business loans (LAP).
⢠Digital Lending: The use of Digital in this space signifies the use of technology to give a superior client experience. The objective has been to complete the loan sourcing through Fintech partners, application evaluation and disbursal within minutes aided by APIs, Configurable Loan Origination System (LOS) and embedded Business Rule Engine (BRE) for automated credit evaluation as per credit policy. This year, we integrated with four NBFC/ Fintech partners for offering Personal Loans. In addition, we partnered with two NBFCs under Colending partnership for offering Business Loans. Overall, we now have 7 partnerships in the Digital Lending space and have emerged as a preferred partner for some of these fintech players as we are able to offer preservation of client journey and better experience based on our technology, which is essential for them. Going forward, in Digital Lending, we plan to scale up monthly disbursals with these partners as well look at adding a few more partnerships so that we have a significant play in this space.
⢠Corporate Lending: Corporate Lending division designs lending solutions to medium and large corporations by providing them bespoke loans to meet specific requirements of their business. Product offerings in the division include long working capital loans, funding for capital expenditure, and special situation financing. With bank funding continuing to be regulatorily restricted to funding capex and working capital requirements of corporates, the non-bank channels continue to see strong viability for value added lending. This was further aided by the withdrawal of Credit Risk Mutual Funds given their own redemption pressure challenges. Going forward alternate corporate credit will increasingly be played through close ended patient capital private fund formats. This is adequately demonstrated by the rapid increase in performing credit and special situation Alternate Investment Funds. The coming year is expected to see an increase in capex spends by leading players in the commodity and industrial sectors, as well as inorganic growth opportunities especially through the IBC mechanism.
⢠Real Estate and Allied Lending: The focus of the Real Estate, Allied division has been on risk adjusted returns, while operating within the
The disclosures as required under Companies (Share Capital and Debentures) Rules, 2014, including amendments thereunder as on 31st March 2022 is as under: |
|
Options granted during the financial year 2021-22 |
50,000* |
Options vested during the financial year 2021-22 |
2,01,115 |
Options exercised during the financial year 2021-22 |
Nil |
The total number of shares arising as a result of exercise of option during the year 2021-22 |
Nil |
Options lapsed during the year 2021-22 |
2,25,087 |
Exercise Price |
103.14-128.88 |
Variation of terms of options during the year 2021-22 |
No variation |
Money realized by exercise of options during the year 2021-22 (In. Rs.) |
Nil |
Total number of options in force during the year 2021-22 |
7,64,913 |
Employee wise details of options granted to during FY 2021-22 : |
|
1. Key Managerial Personnel: |
Nil |
2. Any other employee who receives a grant of options in any one year of option amounting to five percent or more of options granted during the year 2021-22 |
Nil |
a) Mr. Dilip Thakkar |
7,600 |
b) Mr. C.S. Satish |
3,000 |
c) Mr. Anit Kumar Chhabra |
4,000 |
d) Ms. Anju Vithal Kadam |
4,000 |
e) Mr. Joginder A. Makkad |
2,500 |
3. Identified employees who were granted option, during any one year, equal to or exceeding one percent of the issued capital (excluding outstanding warrants and conversions) of the company at the time of grant during the year 2021-22. |
Nil |
* Granted to the specified employees of La-Gajjar Machineries Private Limited, a subsidiary company. Note: As on 31st March 2022, the exercise money for 1571 equity shares is accounted as Share application money. The Company had allotted 1,571 equity shares of Rs. 2/- each on 10th May 2022. |
defined underwriting policy of the Company. During the year, the division has been successful in achieving sectoral and geographical diversification on the portfolio while foraying into new sectors such as Education & Hospitality. The target shall be to continue the existing business with a clear focus on existing client base as well as addition of pedigreed and financially strong clients on a PAN-India basis across each sub-sector. The primary criteria of emphasizing on risk over returns shall continue as well. Further, the business has seen an overall yield compression in line with the market and the focus shall be to deal in structured products with the existing clients to maintain the overall yields, while operating within the overall risk based underwriting framework.
⢠Considering the Companyâs plan for enhancing the strategic flexibility to build vibrant robust platform for the financial service business, the Board of Directors in the meeting held on 9th February 2022 had given its in-principle approval for formation of Private Company as a wholly owned subsidiary of AFHPL to act as Investment Manager and also formation of Trust to act as Alternative Investment Fund for the purpose of Management of funds and undertaking Advisory Business. Further, Arka Financial Holdings Private Limited will be acting as a sponsor to the Alternative Investment Fund.
⢠AFHPL has promoted and incorporated a wholly owned subsidiary, namely, Arka Investment Advisory Services Private Limited (AIASPL) on 30th March 2022 to act as Investment Manager for the purpose of Management of funds and undertaking Advisory Business. As such AIASPL is a wholly owned subsidiary of AFHPL and is step down subsidiary of the Company and there are no commercial operations carried out as on 31st March 2022.
6. KIRLOSKAR OIL ENGINES LIMITED - EMPLOYEE STOCK OPTION PLAN 2019 (KOEL ESOP 2019) -
The members of the Company at the Annual General Meeting of Kirloskar Oil Engines Limited held on 9th August 2019, passed a resolution for introducing Employees Stock Option Plan 2019 - (KOEL ESOP 2019), for the benefit of employees of the Company. The resolution also accorded approval to
the Board of Directors, to formulate the plan as per broad parameters outlined in the resolution, either directly or through a Nomination and Remuneration Committee.
The Members of the Company at the Annual General Meeting of Kirloskar Oil Engines Limited held on 12th August 2021, passed a resolution amending the Kirloskar Oil Engines Limited - Employee Stock Option Plan 2019 in terms of coverage of the KOEL ESOP 2019 to the eligible employees of its subsidiary company, in or out of India except such subsidiary company(ies) which are formed and engaged in financial service business including without limitation to the Arka Fincap Limited and also authorized the Board of Directors or the Nomination and Remuneration Committee of the Company to grant the Options to such employees of the Subsidiary Company(ies) from time to time.
The Securities and Exchange Board of India (âSEBIâ) notified the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 (âSEBI SBEB Regulationsâ) by repealing and merging the SEBI (Share Based Employee Benefits) Regulations, 2014 and the SEBI (Issue of Sweat Equity) Regulations, 2002 (collectively referred to as âErstwhile Regulationsâ) with appropriate modifications which came into force from 13th August 2021. The Nomination and Remuneration Committee in its meeting held on 27th October 2021 further amended the KOEL ESOP 2019 to align and comply the requirements of the SEBI SBEB Regulations along with to bring flexibility provided under the SEBI SBEB Regulations.
The Company had obtained in-principle approval from BSE Limited (BSE) and National Stock Exchange of India Limited (NSE) for listing of 14,00,000 equity shares under KOEL ESOP 2019, pursuant to Regulation 12 of the Chapter II of the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014.
The Nomination and Remuneration Committee at its meeting held on 5th March 2021, approved the grant of 9,40,000 stock options exercisable into 9,40,000 Equity Shares of Rs. 2/- each of the Company to its specified employees of the Company. Further the Nomination and Remuneration Committee at its meeting held on 27th October 2021, approved the grant of 50,000 stock options exercisable into 50,000 Equity Shares of Rs. 2/- each of the Company to the specified employees of La-Gajjar Machineries Private Limited, a subsidiary company.
KOEL ESOP 2019 is in compliance with the applicable provisions of the Companies Act, 2013 and the Rules issued thereunder, the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 (âSEBI SBEB Regulationsâ) and other applicable regulations, if any.
There have been no material changes to the KOEL ESOP 2019 during the Financial Year.
The certificate from Mr. Mahesh J. Risbud, Practicing Company Secretary [PCS No. 185] Secretarial Auditors of the Company, confirming that the scheme has been implemented in accordance with the aforesaid regulations and in accordance with the resolution passed by the Members of the Company at its Annual General Meetings held on 9th August 2019 and 12th August 2021, would be placed before the Members at the ensuing Annual General Meeting. A copy of the same will be available for inspection at the Companyâs website viz. www.kirloskaroilengines.com.
The disclosures on the scheme, details of options granted, changes to the scheme, if any, etc. are placed on the website of the company as required under the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 (âSEBI SBEB Regulationsâ) and can be accessed on the weblink https://www.kirlnskarnilengines.com/investnrs.
In line with the Indian Accounting Standards (âInd ASâ) 102 on ''Share Based Payments'' issued by the Institute of Chartered Accountants of India (âICAIâ), your Company has computed the cost of equity settled transactions by using the fair value of the options at the date of the grant and recognized the same as employee compensation cost over the vesting period.
The Company had allotted 1,571 equity shares of Rs. 2/-each on 10th May 2022, upon exercise of options vested to the eligible employees of the Company pursuant to KOEL ESOP 2019. As on 31st March 2022, the exercise money
for 1,571 equity share is accounted as Share application money. Thereafter consequent to allotment on 10th May 2022, Issued Capital and Subscribed Capital of the Company was increased from 14,46,14,326 equity shares of Rs. 2/- each to 14,46,15,897 equity shares of Rs. 2/- each and Paid-up Capital was increased from 14,46,13,861 equity shares of Rs. 2/- each to 14,46,15,432 equity shares of Rs. 2/- each.
During the year under review,
i. Mr. Pradeep R. Rathi (DIN 00018577) tendered his resignation as Independent Director of the Company due to likelihood of conflict of interest with effect from 9th July 2021. Further, the Company has received confirmation from Mr. Pradeep R. Rathi that there is no other material reason for his resignation other than those mentioned in his resignation letter dated 9th July 2021. The said confirmation was filed with BSE Limited and National Stock Exchange of India Limited on 9th July 2021.
ii. In compliance with Section 149 of the Companies Act, 2013 & Rules thereof including amendments thereunder and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 including amendments thereunder, based on the recommendation of the Nomination and Remuneration Committee, the Board of Directors of the Company appointed Mr. Yogesh Kapur (DIN 00070038) as an Additional Director of the Company
in the capacity of âNon-Executive Independent Directorâ with effect from 29th September 2021. In accordance with Section 161 of the Companies Act, 2013 & Rules thereof including amendments thereunder, he will hold office of Director up to date of ensuing Annual General Meeting. The Company has received requisite notice in writing from a member proposing his candidature for the office of Director. The resolution seeking approval of the Members by special resolution for the appointment of Mr. Yogesh Kapur for a first term of 5 (five) consecutive years, has been incorporated in the Notice of the forthcoming Annual General Meeting of the Company.
iii. Mr. Sanjeev Nimkar (DIN: 07869394) has tendered his resignation as Managing Director of the Company due to personal reasons and pre-occupation with effect from 27th January 2022.
iv. In compliance with Section 196, 197, 203 read with schedule V and other applicable provisions if any of the Companies Act, 2013, and the rules made thereunder, based on the recommendation of the Nomination and Remuneration Committee, the Board of Directors of the Company continued the appointment of Mr. Atul C. Kirloskar (DIN 00007387), existing Director of the Company, as Whole Time Director with designation as the Executive Chairman of the Company to hold office till 31st March 2023 with retrospective effect from 26th January 2022, which is subject to approval of the Members. The resolution seeking approval of the Members for the continuation of the appointment of Mr. Atul C. Kirloskar (DIN 00007387), existing Director of the Company, as Whole Time Director with designation as the Executive Chairman of the Company to hold office till 31st March 2023 with retrospective effect from 26th January 2022, has been incorporated in the Notice of the forthcoming Annual General Meeting of the Company.
v. In compliance with Section 149 of the Companies Act, 2013 & Rules thereof including amendments thereunder and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 including amendments thereunder, based on the recommendation of the Nomination and Remuneration Committee, the Board of Directors of the Company appointed Dr. Ajay Bhushan Prasad Pandey (DIN 07939197) as an Additional Director of the Company in the capacity of âNon-Executive Independent Directorâ with effect from 9th March 2022 to hold office of Director up to the date of ensuing General Meeting. His appointment as an Independent Director of the Company was for a first term of five (5) consecutive years with effect from 9th March 2022, subject to approval of the shareholders in the ensuing Annual General Meeting.
However, Dr. Ajay Bhushan Prasad Pandey has tendered his resignation as an Additional Director in the capacity as an Independent Director of the Company to avoid any potential conflict of interest on account of his joining as Chairperson of National Financial Reporting Authority (NFRA) with effect from 21st March 2022. Further, the Company has received confirmation from Dr. Ajay Bhushan Prasad Pandey that there is no other material reason for his resignation other than those mentioned in his resignation letter dated 21st March 2022. The said confirmation was filed with BSE Limited and National Stock Exchange of India Limited on 21st March 2022.
vi. Mr. Nihal Kulkarni (DIN 01139147), has tendered his resignation as Non-Executive Director of the Company as he is desirous of pursuing his own ambitions and interests which arc different and independent of the Kirloskar group businesses, with effect from 9th February 2022. The Board of Directors in its meeting held on 9th February 2022, has accepted his resignation with immediate effect which was filed with BSE Limited and National Stock Exchange of India Limited on 9th February 2022. On 9th February 2022, Mr. Nihal Kulkarni and his family also conveyed their intension of discontinuation as âPromoterâ of the Company or otherwise directly / indirectly participate in the management of the Company and also sale of their equity shares in compliances with applicable laws/regulations.
vii. In compliance with Section 149 of the Companies Act, 2013 & Rules thereof including amendments thereunder and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 including amendments thereunder, based on the recommendation of the Nomination and Remuneration Committee, the Board of Directors of the Company appointed Mrs. Purvi Sheth (DIN 06449636) as an Additional Director of the Company in the capacity of âNon-Executive Independent Directorâ with effect from 19th May 2022. In accordance with Section 161 of the Companies Act, 2013 & Rules thereof including amendments thereunder, she will hold office of Director up to date of ensuing Annual General Meeting. The Company has received requisite notice in writing from a member proposing her candidature for the office of Director. The resolution seeking approval of the Members by special resolution for the appointment of Mrs. Purvi Sheth for a first term of 5 (five) consecutive years, has been incorporated in the Notice of the forthcoming Annual General Meeting of the Company.
viii. In compliance with Section 149 of the Companies Act, 2013 & Rules thereof including amendments thereunder and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015
including amendments thereunder, the Board of Directors of the Company re-appointed Mr. Satish Jamdar (DIN 00036653) as âNon-Executive Independent Directorâ with effect from 4th August 2022. The Company has received requisite notice in writing from a member proposing his candidature for office of Director. The resolution seeking approval of the Members by special resolution for the re-appointment of Mr. Satish Jamdar for a second term of 4 (four) consecutive years, has been incorporated in the notice of the forthcoming Annual General Meeting of the Company.
ix. Mr. Vinesh Kumar Jairath (DIN 00391684) retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment.
x. In compliance with Section 196, 197, 203 read with schedule V and other applicable provisions if any of the Companies Act, 2013, and the rules made thereunder, based on the recommendation of the Nomination and Remuneration Committee, the Board of Directors of the Company appointed Ms. Gauri Kirloskar (DIN 03366274), existing Director of the Company, as a Whole Time Director with the designation as Managing Director of the Company with effect from 20th May 2022 for a term of 3 years, which is subject to approval of the Members. The resolution seeking approval of the Members for the appointment of Ms. Gauri Kirloskar (DIN 03366274), existing Director of the Company, as a Whole Time Director with the designation as Managing Director of the Company with effect from 20th May 2022 for a term of 3 (Three) consecutive years, has been incorporated in the notice of the forthcoming Annual General Meeting of the Company.
xi. Mrs. Mrunalini Deshmukh (DIN 07092728) tendered her resignation as Independent Director of the Company due to pre-occupation with effect from 20th May 2022 vide resignation letter dated 19th May 2022. Further, the Company has received confirmation from Mrs. Mrunalini Deshmukh that there is no other material reason for her resignation other than those mentioned in her resignation letter dated 19th May 2022. The said confirmation was filed with BSE Limited and National Stock Exchange of India Limited on 19th May 2022.
The brief resumes and other details relating to the Directors who are proposed to be appointed / re-appointed, as required to be disclosed under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 including amendments thereunder, forms part of the Notice of Annual General Meeting.
i. Mr. Atul C. Kirloskar (DIN 00007387), Executive Chairman, has continued as a Key Managerial Personnel of the Company with effect from 26th January 2022.
ii. Mr. Sanjeev Nimkar (DIN: 07869394) has tendered his resignation as Managing Director of the Company with effect from 27th January 2022. Consequent to this, he ceased as the Key Managerial Personnel of the Company with effect from 27th January 2022.
iii. Mr. Aseem Srivastav, the Chief Executive Officer of the Company, is appointed as the Key Managerial Personnel of the Company, with effect from 20th May 2022.
iv. Ms. Gauri Kirloskar (DIN 03366274), the Managing Director of the Company, is appointed as the Key Managerial Personnel of the Company, with effect from 20th May 2022.
Other than the above, there are no other changes in Key Managerial Personnel of the Company in the Financial Year 2021-22.
The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence as prescribed under Section 149 (7) of the Companies Act, 2013 & Rules thereof including amendments thereunder and Regulation 16(1)(b) & 25(8) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 including amendments thereunder.
The Company has also received declarations from all the Independent Directors of the Company confirming that they have complied with the Code for Independent Directors as prescribed in Schedule IV to the Companies Act 2013 including amendments thereunder. The said Code is available on the Companyâs website.
All the Independent Directors of the Company have enrolled themselves in the data bank with the âIndian Institute of Corporate Affairsâ, New Delhi, India and eligible Independent Directors have also completed the proficiency test.
d) A statement regarding opinion of the Board with regard to Integrity, Expertise and Experience (including the proficiency) of the Independent Directors appointed during the year
The Board of Directors considered that Mr. Yogesh Kapur (DIN 00070038), Mrs. Purvi Sheth (DIN 06449636) and Mr. Satish Jamdar (DIN 00036653) possess the requisite expertise and experience (including the proficiency) and they are persons of high integrity and repute and accordingly approved their appointment/re-appointment as Independent Director(s) which is, subject to approval of the members of the Company.
Other than the above, there are no other appointment / re-appointment of Independent Directors of the Company in Financial Year 2021-22.
The Board of Directors carried out a formal review of the performance and effectiveness of the Board, Committees of the Board and of the individual directors including the Chairman of the Board for the Financial Year 2021-22.
The performance of the Board was evaluated on the basis of criteria such as the board composition and structure, effectiveness of Board processes, participation in organization strategy including Long Range Plan and Annual Operating Plan, inorganic growth opportunity evaluation, Enterprise Risk Management etc.
Using appropriate criteria the performance of the various Committees was separately evaluated by the Board.
In a separate meeting of Independent Directors, performance of non-independent directors, performance of the Board as a whole, performance of the Chairman, taking into account the views of executive directors and non-executive directors, was evaluated and inter alia discussed the issues arising out of Committee Meetings and Board discussion including the quality, quantity and timely flow of information between the Company Management and the Board that is necessary for the Board to effectively and reasonably perform their duties. The outcome of the meeting was presented to the Board along with the course of actions taken for implementing the observations.
A separate exercise was carried out to evaluate the performance of individual Directors including the Chairman of the Board, who were evaluated on parameters such as achievement against key performance objectives, attendance at meetings, time devoted for the Company, contribution in the Board process etc.
Feedback was sought by way of a structured questionnaire covering various aspects of the Boardâs functioning such as adequacy of the composition of the Board and its Committees, Board culture, execution and performance of specific duties, obligations and governance and the evaluation was carried out based on responses received from the Directors.
The Independent Directors shared their inputs on effectiveness of the Board processes with the Chairman of the Board.
The Directors expressed their satisfaction with the evaluation process.
The result of evaluation was satisfactory and meets the requirements of the Company.
The Board of Directors, on the recommendation of the Nomination & Remuneration Committee, has adopted a policy that lays guidelines for selection and appointment of Directors, Key Managerial Personnel and Senior
Management personnel together with their remuneration. The Nomination and Remuneration Policy is available on the website of the Company. (Web - link https://www. kirloskaroilengines.com/documents/541738/2bd3cfb1-7d20-f25a-1163-3a003fd96c15).
g) Number of meetings of the Board
During the period under review, six (6) Board Meetings were held, the details of which form part of the Report on Corporate Governance.
The Composition of Committees of the Board viz. Audit Committee, Nomination and Remuneration Committee, Risk Management Committee and Stakeholder Relationship Committee forms part of the Report on Corporate Governance.
The Composition of Corporate Social Responsibility Committee forms part of Annexure A of this report.
During the year under review, the Board has accepted all the recommendations given by the Committees of the Board, which are mandatorily required.
9. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS
During the year under review, the Company has invested in equity shares of Arka Financial Holdings Private Limited, Wholly Owned Subsidiary of the Company and Arka Fincap Limited (earlier known as Kirloskar Capital Limited), step down Subsidiary of the Company. Further the Company has transferred its entire shareholding in Arka Fincap Limited to Arka Financial Holdings Private Limited. The details are given in the Financial Statements. The Company has not granted any Loans and Guarantees covered under Section 186 of the Companies Act, 2013 & Rules thereof including amendments thereunder.
10. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES
All related party transactions that were entered into during the Financial Year 2021-22 were on an armâs length basis and in the ordinary course of business. Hence, there are no transactions to be reported in Form AOC-2. None of the related party transactions entered into by the Company, were materially significant, warranting membersâ approval under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 including amendments thereunder. All Related Party Transactions are routinely placed before the Audit Committee for approval after being duly certified by the Independent Chartered Accountant. The Audit Committee had granted the omnibus approval for the proposed transactions other than approved by the Audit Committee from time to time with Related Party during financial year 2021-22, which
are reviewed on quarterly basis by the Audit Committee after being duly certified by the Independent Chartered Accountant.
During the year, the policy on Related Party Transactions was amended in order to cover the provision of omnibus approval by the Audit Committee and to align with the provisions of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Sixth Amendment) Regulations, 2021. The amended policy on Related Party Transactions is uploaded on the Companyâs website.
The disclosures as per IND-AS 24 for transactions with related parties are provided in the Financial Statements of the Company.
11. RISK MANAGEMENT, INTERNAL AUDIT AND INTERNAL CONTROL FRAMEWORK
The Board recognizes the importance of sound internal controls and risk management practices to good corporate governance. The Board is responsible for the governance of risk and ensures that management maintains a sound system of risk management and internal controls, to safeguard the interests of the Company and its shareholders. All material decisions of the Board take into relevant consideration the nature and extent of risks which the Company is willing to take in achieving its strategic objectives and value creation.
In line with the commitment of a high standard of compliance with accounting, financial reporting, internal controls, corporate governance and auditing requirements and any legislation relating thereto, the Company has a Code of Business Conduct applicable to Company personnel covering a wide range of business practices and procedures. This includes, but is not limited to, compliance with laws, rules and regulations, conflicts of interests, insider trading, competition and fair dealing, discrimination and harassment, health and safety, environmental matters, record-keeping, financial controls and disclosures, confidentiality, protection and proper use of company assets, financial reporting and compliance.
The Companyâs internal control system is commensurate with the nature of the business, size and complexity of operations covering all businesses and functions of the organization. The internal control system maintains a repository of internal controls which is tested and updated through its internal audits to ensure adequacy and effectiveness of all major internal controls.
A risk based audit plan on a yearly basis is approved by the Audit Committee. The audit plan covers all businesses and functions across all locations. Significant observations and progress of implementation of action plan are reported to and reviewed by the Audit Committee.
In addition to this, control self-assessment framework complements the internal audits and helps the employees to monitor the internal controls they are responsible for. This system aids in building robust control environment across the organization.
Both, the internal audit and control self-assessments processes are automated to promote efficient tracking of open audit issues without manual intervention.
The enterprise risks and their mitigation plans are presented by the risk owners to the Risk Management Committee. The Enterprise Risk Management (âERMâ) framework is aimed at effectively mitigating the business and enterprise risks through strategic actions. The mitigation plans for enterprise and business risks are reviewed and updated on a periodic basis to the Risk Management, Audit Committee and the Board of Directors of the Company.
The Companyâs risk management process is designed to facilitate identification, evaluation, mitigation and review of risks which may affect achievement of objectives. It is aligned with the strategy deployment processes of the organization.
The Risk management process which has been established across the Company, addresses major types of risks, including cyber security, which are at enterprise and business level. The risks are reviewed with respect to the likelihood and impact following a balanced bottom-up and top-down approach covering all businesses and functions of the Company. The review of the risks is done based on changes in the external environment, which have a significant bearing on the risks.
The Risk Management Policy developed by the Company guides the risk management processes which is in line with size, scale and nature of the Companyâs operations. The risk management process works at various levels across the organization. It is an ongoing process and forms an integral part of Management focus.
The Risk Management Committee oversees risk management standards, practices, and systems. The Risk Management Committee periodically reviews the effectiveness of the Enterprise Risk Management system within the Company and evaluates the adequacy and effectiveness of administrative, operating, and accounting controls used by the Company.
The enterprise risks and mitigation plans are reviewed by the Risk Management Committee, Audit Committee and the Board of Directors periodically.
12. INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO THE FINANCIAL STATEMENTS
The Company has in place adequate internal financial controls with reference to the Financial Statements commensurate with the size, scale and complexity of its operations.
13. CORPORATE SOCIAL RESPONSIBILITY
The Company has always believed in working for the betterment and upliftment of society. Corporate Social Responsibility (CSR) has been practiced and ingrained over the years in the Company. The focus areas under CSR have remained consistent over the years and include education, health and hygiene, environment, Disaster Management and Rural development etc.
The Company has adopted the Corporate Social Responsibility (CSR) policy which is further amended in lines with the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021.
The Composition of CSR Committee of the Board and Report on CSR activities is annexed herewith as Annexure A.
14. VIGIL MECHANISM / WHISTLE BLOWER POLICY
The Company has adopted a Vigil Mechanism / Whistle Blower Policy. The Policy provides a mechanism for employees of the Company and other persons dealing with the Company to report to the Chairman of the Audit Committee any instance of unethical behaviour, actual or suspected fraud or violation of the Company''s code of conduct or leakage of Unpublished Price Sensitive Information (UPSI), by any person, who is in possession of UPSI, to any other person in any manner whatsoever, except as otherwise permitted under the SEBI (Prohibition of Insider Trading) Regulations or any other instance. The e-learning and awareness on whistleblower policy is made available to the employees of the Company.
No person has been denied access to the Audit Committee in this regard. There were no complaints filed / pending with the Company during the year.
The Policy is uploaded on the Companyâs website (Web - link https://www.kirlnskarnilengines.com/dncuments/541738/ e498c5bb-651b-a713-d93e-25ed9b52136a).
15. EXTRACT OF ANNUAL RETURN
As required under Section 92(3) read with section 134(3) (a) of the Companies Act 2013 read with rule 12 of the Companies (Management and Administration) Rules, 2014 including amendments thereunder, the Annual Return filed with the Ministry of Corporate Affairs (MCA) for the Financial Year 2020-21 is available on the (Web - link https://www. kirloskaroilengines.com/documents/541738/a8dd8318-4a08-8f95-8015-4cc880f14c01) and the Annual Return for Financial Year 2021-22 will be made available on the website of the Company once it is filed with the MCA.
16. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE AND OUTGO
Information relating to conservation of energy, technology absorption and foreign exchange earnings and outgo as required under section 134 (3)(m) of the Companies Act, 2013, & Rules thereof including amendments thereunder, are provided in Annexure B to this report.
17. PARTICULARS OF EMPLOYEES
Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 including amendments thereunder, are annexed in Annexure C of this report.
The particulars of employees pursuant to Section 197(12) of the Companies Act, 2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 including amendments thereunder, forms part of this report. In terms of Section 138 (1) of the Companies Act, 2013 & Rules thereof including amendments thereunder, the Directorsâ report is being sent to the shareholders without this Annexure. A copy of this annexure will be made available in electronic form to the members on request raised by them on the dedicated email id of the Company at [email protected].
18. POLICY ON PREVENTION OF SEXUAL HARRASSMENT (POSH)
The Company has in place a Policy for prevention of sexual harassment at workplace. This inter alia provides a mechanism for the resolution, settlement or prosecution of acts or instances of Sexual Harassment at work and ensures that all employees are treated with respect and dignity. The Company has complied with the provisions relating to the constitution of internal complaints committee under the Sexual Harassment of Women at work place (Prevention, Prohibition and Redressal) Act, 2013.
Awareness programs are conducted on the POSH during the Financial Year 2021-22. Also, all new joinees at the Company undergo separate induction on POSH policy. Online modules and courses on POSH are introduced which includes details of regulatory requirements, Incidents that constitutes sexual harassment, dealing with sexual harassment etc.
There were no complaints filed / pending with the Company during the year.
a. There were no public deposits accepted by the Company pursuant to provisions of the Companies Act, 2013 & Rules thereof including amendments thereunder.
b. Mr. Sanjeev Nimkar (DIN: 07889394), Whole - Time Director designated as Managing Director of the Company upto 27th January 2022, had received the commission of Rs. 5,30,000/- during Financial Year 2021-22 from La-Gajjar Machineries Private Limited, Subsidiary Company.
c. There was no instance of fraud during the year under review, which required the Statutory Auditors to report to the Audit Committee and / or Board under Section 143(12) of Act & Rules thereof including amendments thereunder.
d. The Company has maintained cost records as specified by the Central Government under sub-section (1) of section 148 of the Companies Act, 2013 & Rules thereof including amendments thereunder.
e. The Company has complied with all applicable mandatory Secretarial Standards issued by the Institute of Company Secretaries of India, New Delhi.
f. To the best of our knowledge, the Company has not received any such order from Regulators, Courts or Tribunals, which may impact the going concern status or the operations of the Company in future.
g. There have been no material changes and commitments, affecting the financial position of the Company which have occurred between the end of the Financial Year of the Company to which the Financial Statements relate and the date of this Report.
h. Neither any application has been made nor any proceeding has been pending against the Company under the Insolvency and Bankruptcy Code, 2018.
The Members of the Company in their meeting held on 5th August 2018, had re-appointed P G BHAGWAT LLP Chartered Accountants, Pune, (Firm Registration Number 101118W/W100882) as Statutory Auditors of the Company for a second term of 5 (five) consecutive years to hold office from Annual General Meeting held on 5th August 2018 till the conclusion of the Annual General Meeting to be held in the year 2021. Accordingly, the second term of re-appointment of P G BHAGWAT LLP Chartered Accountants, Pune, (Firm Registration Number 101118W/W100882) as Statutory Auditors of the Company was valid till 12th August 2021.
The members of the Company in their meeting held on 12th August 2021, appointed G.D. Apte, Chartered Accountants, Pune, (Firm Registration Number 100515W) as Statutory Auditors of the Company for a first term of 5 (five) consecutive years to hold office from Annual General Meeting held on 12th August 2021 till the conclusion of the Annual General Meeting to be held in the year 2028.
The Company has received from them the requisite certificate pursuant to Section 139 of the Companies Act, 2013 & Rules thereof including amendments thereunder.
The Report given by the Auditors on the Standalone and Consolidated financial statements of the Company for the Financial Year 2021-22 is part of this report. There are no qualifications, reservations, adverse remarks or disclaimer given by the Auditors in their report.
b) Cost Auditors
M/s. Parkhi Limaye & Co, Cost Accountants (Firm Registration No. 191) carried out the cost audit during the year. The Board of Directors has appointed M/s. Parkhi Limaye & Co. as Cost Auditors of the Company for the Financial Year 2022-23 as required under section 148 of the Companies Act, 2013 & Rules thereof including amendments thereunder.
The Board of Directors has appointed Mr. Mahesh J. Risbud, Practicing Company Secretary [PCS No. 185] to conduct Secretarial Audit of the Company under section 204 of the Companies Act, 2013 & Rules thereof including amendments thereunder.
The Secretarial Audit Report is annexed herewith as Annexure D-1.
There are no adverse remarks / qualifications of Secretarial Auditors in the Secretarial Audit Report for the year ended 31st March 2022.
Mr. Mahesh J. Risbud, Practising Company Secretary, Pune, has submitted Secretarial Compliance Report as laid down in SEBI Circular CIR/CFD/CMD1/27/2019 dated 8th February 2019, and has also confirmed that the Company has complied with of all applicable SEBI Regulations and circulars / guidelines issued thereunder, for the Financial Year 2021-22.
La-Gajjar Machineries Private Limited (LGM), is a material unlisted subsidiary of the Company. The Secretarial Audit of LGM for the Financial Year 2021-22 was carried out pursuant to Section 204 of the Companies Act, 2013 & Rules thereof including amendments thereunder read with Regulation 24A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 including amendments thereunder. The Secretarial Audit Report of LGM has been submitted by Mr. Mahesh J. Risbud, Practicing Company Secretary for the Financial Year 2021-22.
The Secretarial Audit Report is annexed herewith as Annexure D-2.
There are no adverse remarks / qualifications in the Secretarial Audit Report of LGM for the the Financial Year 2021-22.
21. MANAGEMENT DISCUSSION & ANALYSIS AND REPORT ON CORPORATE GOVERNANCE
The Management Discussion and Analysis and the Report on Corporate Governance as required under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, including amendments thereunder, forms part of this Annual report.
A Certificate from the Statutory Auditors of the Company regarding compliance with conditions of corporate governance as required under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, including amendments thereunder, also forms part of this Annual Report.
22. BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORT (BRSR)
Pursuant to Regulation 34 of SEBI (Listing Obligations and Disclosures Requirements) Regulations, 2015, including amendment thereunder, the annual report shall contain a Business Responsibility Report (BRR) describing the initiatives taken by the listed entity from an environmental, social and governance perspective. In terms of amendment to regulation 34 (2) (f) of said Regulations vide Gazette notification no. SEBI/LAD-NRO/GN/2021/22 dated 5th May 2021, new reporting requirements on Environmental, Social and Governance (ESG) parameters called the Business Responsibility and Sustainability Report (BRSR) has been introduced which is applicable to the top 1000 listed entities (by market capitalization). The BRSR reporting is on voluntary basis for the Financial Year 2021-2022 and mandatory from the Financial Year 2022-2023. Considering the ESG Framework adopted by the Company, on voluntary basis the Company has adopted the Business Responsibility and Sustainability Report (BRSR) for the Financial Year 2021-2022, which is forming part of this Annual Report.
23. DIRECTORSâ RESPONSIBILITY STATEMENT
Pursuant to Section 134 of the Companies Act, 2013, including rules made thereof and amendments thereunder, the Directors, based on the representations received from the Operating Management, confirm that:
a) In the preparation of the Annual Accounts, the applicable accounting standards have been followed and that no material departures have been made from the same;
b) They have 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 as at 31st March 2022 and of the profit of the Company for the year ended on that date;
c) They have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, including rules made thereof and amendments thereunder, for safeguarding assets of the Company and for preventing and detecting fraud and other irregularities;
d) They have prepared the annual accounts on a going concern basis;
e) They have laid down internal financial controls to be followed by the Company and such internal financial controls are adequate and operating effectively; and
f) They have devised proper systems to ensure compliance with provisions of all applicable laws and such systems are adequate and operating effectively.
Statements in this report, particularly those which relate to Management Discussion & Analysis, describing the Company''s objectives, projections, estimates and expectations may constitute âforward looking statementsâ within the meaning of applicable laws and regulations. Actual results may differ materially from those either expressed or implied.
On behalf of the Board of Directors, I would like to pay tribute to the following groups of people whose support has helped us, in one way or other, in navigating through the difficult year.
I am grateful to our customers for returning and trusting us following the reopening of the economy. Our top priority of providing quality products and services to all our customers remains unchanged in these difficult times.
Thank you to our employees for their professionalism as they responded and adapted to the changes to their work and workplace brought about by the pandemic. Our people rose to the challenge of ensuring the continued delivery of products and services to customers in all circumstances.
On behalf of the Directors, I would like to extend our sincere gratitude to our shareholders, investor community, bankers and suppliers for their continuous support and commitment.
I would like to express my appreciation to the Board of Directors for their invaluable guidance, wisdom, and support in guiding the Company through this rather difficult year. I look forward to working with them to drive KOEL to greater heights in coming years.
For and on behalf of the Board of Directors
Sd/-
Date: 19th May 2022 EXECUTIVE CHAIRMAN
Place: Pune DIN: 00007387
The entire FY 2021-22 was highly volatile as far as the commodity rates movement is concerned. These prices of the products are directly linked to movement in the rates of the major Raw Materials i.e. Copper in case of Wires & Cables and PVC Resin in case of Pipes, which covers the major sales of the Company. The Price rise of Raw Materials has widened the gap between organized and unorganized brands. The Company is positioned closer to organized brands; hence the gap between the Company and unorganized players was higher.
iv. ESVA Pumps India Private Limited (âESVAâ)
⢠The Joint Venture cum Shareholders Agreement was executed on 31st August 2021 between OPEPL, Mr. V Bharanitharan, Mrs. C. Shanthi, ESVA Pumps India Private Limited Coimbatore, Vahinie Engineering and V Tech and the Share Purchase Agreement was also executed on 31st August 2021 between Mr. V Bharanitharan,
Mar 31, 2018
REPORT OF THE DIRECTORS
TO THE MEMBERS
OF KIRLOSKAR OIL ENGINES LIMITED
The Directors are pleased to present the 9th Annual Report together with the Audited Statement of Accounts for the year ended 31 March 2018.
FINANCIAL RESULTS (STANDALONE)
(Rs, in Crores)
Particulars |
2017-18 |
2016-17 |
Total Income |
2,956.55 |
2,958.22 |
Profit before exceptional items and tax |
222.48 |
252.30 |
Exceptional Items |
- |
- |
Profit before tax |
222.48 |
252.30 |
Tax Expense (Current & Deferred Tax) |
72.37 |
78.68 |
Net Profit for the Period |
150.11 |
173.62 |
Other Comprehensive Income |
1.06 |
(0.58) |
Total Comprehensive Income for the year, net of tax |
151.17 |
173.04 |
Profit Brought Forward |
979.20 |
806.15 |
Profit Available for Appropriation |
1,130.37 |
979.20 |
Transfer to General Reserve |
- |
- |
Dividend and dividend distribution tax |
130.54 |
- |
Balance of the Profit carried forward |
999.83 |
979.20 |
COMPANYRs,S FINANCIAL PERFORMANCE
Despite an extremely challenging macroeconomic environment, your Company posted its highest net sales of Rs, 2804 crores as compared to the previous fiscal of Rs, 2614 crores. An increase of 7%. Profit from operations (before exceptional items) was Rs, 222 crores as against Rs, 252 crores in the previous year. The Industrial Promotion Subsidy (IPS) which the Company was availing of, for operations in Kagal, came to an end on 31 March 2017. In the previous year, the amount availed was approximately Rs, 36 crores. The Profit After Tax was Rs, 150 crores as against Rs, 174 crores in the previous year.
DIVIDEND
For the year under review, the Directors have declared an Interim Dividend of 125% (Rs, 2.50/- per share) and also recommended a dividend of 125% (Rs, 2.50/- per share) for the year (PY Final Dividend 250%, Rs, 5 per share). Total dividend payout for the year will be Rs, 72.30 crores, including payment of Rs, 14.79 crores, as dividend distribution tax.
ACQUISITION
During the year under review, the Company entered into a Share Purchase Agreement for acquisition of 100% equity shares of La-Gajjar Machineries Private Limited (LGM), a leading submersible and mono block pump manufacturer based in Ahmedabad, Gujarat, India with established brands âVarunaâ and âRaindropâ and a pan-India distribution setup. This is a strategic acquisition made in order to consolidate the Companyâs position in the diesel and electric pump segment. The Company is confident that synergies will play out in the future and the Company will attain leadership position in the complete pump segment.
As part of the Share Purchase Agreement, signed on 1 August 2017, the Company acquired 76% of equity shares of LGM, being the first tranche, with a clear understanding that the balance 24% will be acquired by the Company over a 5 year period. LGM has become a subsidiary of the Company with effect from 1 August 2017.
In the first eight months of operation, the focus has been to establish processes and policies in line with the Company, set direction and integrate operations wherever needed to extract synergies going forward.
AMENDMENT TO THE MAIN OBJECT CLAUSE OF MEMORANDUM OF ASSOCIATION
During the year under review, the Company altered the Main Object Clause of its Memorandum of Association to include âFinancial Servicesâ business on its own or through a subsidiary, established for the purpose, with approval of members of the Company by way of postal ballot. The Company has promoted and incorporated a wholly owned subsidiary, namely, Kirloskar Capital Limited (KCL) on 20 April 2018 for the purpose of commencement of financial service business.
SUBSIDIARY COMPANY AND CONSOLIDATED FINANCIAL STATEMENTS
As on 31 March 2018, the Company had the following two subsidiaries:
1. KOEL Americas Corp., USA (KOEL Americas)
2. La-Gajjar Machineries Private Limited (LGM)
The additional sales revenue from KOEL Americas Corp. USA (wholly owned subsidiary) for the fiscal ended 31 March 2018, was $ 37,30,142 (Rs, 24.06 crores). Profit from operations before Tax was $ 1,51,319 (Rs, 0.98 crores). The Profit after Tax was $ 1,12,222 (Rs, 0.73 crores). The additional sales revenue from La-Gajjar Machineries Private Limited (subsidiary) for the period from 1 August 2017 to 31 March 2018, was Rs, 214 crores Loss from operations before Tax was Rs, 11 crores. The Net Loss was Rs, 8 crores.
The consolidated financial statements of the Company and its two subsidiaries, prepared in accordance with IND-AS 110, issued by Institute of Chartered Accountants of India, forms part of this Annual Report. A statement containing the salient features of the financial statements of the subsidiary companies is attached to the Financial Statements of the Company in Form AOC-1.
Pursuant to the provisions of Section 136 of the Companies Act, 2013, the financial statements along with relevant documents of the Company and its subsidiaries are available on the Companyâs website.
The annual accounts of the subsidiaries and related detailed information will be kept for inspection by any shareholders at the Registered Office of the Company and will also be made available to the shareholders on demand, at any point of time.
DIRECTORS a) Changes in Composition of the Board of Directors:
- Mr. Mahesh R. Chhabria was appointed as Managing Director of Kirloskar Industries Limited, a Promoter Group Company with effect from 4 July 2017. Consequent to this, he ceased to be Independent Director of the Company but continued to be Non-Independent Director of the Company with effect from 4 July 2017.
- On account of ill health, Mr. Gautam A. Kulkarni, Executive Vice Chairman of the Company, tendered his resignation effective 14 September 2017. It was unfortunate that on 20 September 2017, he succumbed to his illness. The Board in its meeting dated 13 October 2017 placed on record their appreciation for the guidance, support and contribution provided by him during his tenure as Director of the Company.
- The Board of Directors of the Company in its meeting held on 19 January 2018, reappointed Mr. Rajendra R. Deshpande as the Whole Time Director with designation as Joint Managing Director, for a term of 2 years with effect from 29 April 2018. A proposal for his re-appointment as the Joint Managing Director and remuneration payable to him is being placed before the Members of the Company for their approval at the ensuing Annual General Meeting.
- Mr. Mahesh R. Chhabria retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment.
The brief resumes and other details relating to the Directors who are proposed to be appointed / re-appointed, as required to be disclosed under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, forms part of the Notice of Annual General Meeting.
b) Changes in Key Managerial Personnel:
Mr. Rajendra R. Deshpande, Joint Managing Director, was re-appointed as Key Managerial Personnel of the Company, with effect from 29 April 2018.
c) Declarations from the Independent Directors:
The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence as prescribed under Section 149 (6) of the Companies Act, 2013, including amendment thereof and Regulation 16(1)(b) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
d) Board Evaluation:
In continuation of the process laid down in the previous year, members of the Board carried out a formal review for evaluating the performance and effectiveness of the Board, Committees of the Board and of the individual directors including the Chairman of the Board.
The performance of the Board was evaluated on the basis of criteria such as the board composition and structure, effectiveness of Board processes, participation in organization strategy including Long Range Plan and Annual Operating Plan, inorganic growth opportunity evaluation, Enterprise Risk Management etc.
Using appropriate criteria the performance of the various Committees was separately evaluated by the Board.
In a separate meeting of Independent Directors, performance of non-independent directors, performance of the Board as a whole and performance of the Chairman, taking into account the views of executive directors and non-executive directors, were evaluated.
A separate exercise was carried out to evaluate the performance of individual Directors including the Chairman of the Board, who were evaluated on parameters such as achievement against key performance objectives, attendance at meetings, time devoted for the Company, contribution in the Board process etc.
The Chairman of the Board and the Chairman of Nomination and Remuneration Committee had one-on-one meetings with the Directors. These meetings were intended to obtain Directorsâ inputs on effectiveness of the Board/Committee processes.
e) Nomination and Remuneration Policy:
The Board of Directors, on the recommendation of the Nomination & Remuneration Committee, has adopted a policy that lays guidelines for selection and appointment of Directors, Key Managerial Personnel and Senior Management personnel together with their remuneration. The Nomination and Remuneration Policy is available on Companyâs website.
f) Number of meetings of the Board :
During period under review, eight (8) Board Meetings were held, the details of which forms part of Report on Corporate Governance.
g) Composition of Audit Committee :
The Composition of Audit Committee forms part of the Report on Corporate Governance.
PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS
During the year under review, the Company has invested in equity shares of La-Gajjar Machineries Private Limited. The details of which are given in the Financial Statements. The Company has not granted any Loans and Guarantees covered under Section 186 of the Companies Act, 2013.
PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES
All related party transactions that were entered into during the Financial Year 2017-18 were on an armâs length basis and were in the ordinary course of business. Hence, there are no transactions to be reported in Form AOC-2. None of the related party transactions entered into by the Company, were materially significant, warranting membersâ approval under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. All Related Party Transactions are routinely placed before the Audit Committee for approval after being duly certified by the Statutory Auditors.
The policy on Related Party Transactions as adopted by the Board is uploaded on the Companyâs website.
The disclosures as per IND-AS 24 for transactions with related parties are provided in the Financial Statements of the Company.
RISK MANAGEMENT FRAMEWORK
Risk management is a continuous process within the organization which works all across functions and businesses. The process facilitates identification, evaluation, mitigation and review of risks and opportunities both at business and enterprise level which may affect achievement of objectives.
The Internal Audit Department facilitates the risk management process by working with the businesses, functions and senior management to address major types of risks which are strategic, people, environmental, economic and operational in nature in a structured and focused manner.
Detailed mitigations are prepared post identification of risk, which are aligned to the business goals and enterprise vision, both short and long term. The business heads with the help of Internal Audit Department reviews the risks with respect to the likelihood and impact in a structured forum to ensure bottom up approach is followed in addition to a top down approach.
The enterprise risks and mitigation plans are reviewed by the Audit Committee and Board periodically.
INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO THE FINANCIAL STATEMENTS
The Company''s Internal Control Framework is Commensurate with the size and nature of its operations.
Details of internal financial control and its adequacy are included in the Management Discussion and Analysis Report, which forms part of this Report.
CORPORATE SOCIAL RESPONSIBILITY
The Company has always believed in working for the betterment and upliftment of society. Corporate Social Responsibility (CSR) has been practiced and engrained over the years in the Company. The focus areas under CSR have remained consistent over the years and include: Health, Education and Environment.
The Company strongly believes in âEnriching Livesâ of the people surrounding the communities in which it operates.
The Composition of CSR Committee of the Board and Report on CSR activities is annexed herewith as Annexure A.
VIGIL MECHANISM / WHISTLE BLOWER POLICY
The Company has a Vigil Mechanism / Whistle Blower Policy to deal with instances of fraud, unethical behaviour, mismanagement etc. The Policy provides a mechanism for employees of the Company and other persons dealing with the Company to report to the Chairman of the Audit Committee any instance of unethical behaviour, actual or suspected fraud or violation of the Company''s code of conduct. No person has been denied access to the Audit Committee in this regard. The Policy is uploaded on the Companyâs website.
EXTRACT OF ANNUAL RETURN
The details forming part of the extract of the Annual Return in form MGT 9 is annexed herewith as Annexure B to this report.
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE AND OUTGO
Information relating to conservation of energy, technology absorption and foreign exchange earnings and outgo as required under section 134 (3)(m) of the Companies Act, 2013, read with the rules there under, are provided in Annexure C to this report.
PARTICULARS OF EMPLOYEES
Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are annexed in Annexure D of this report.
The particulars of employees pursuant to section 197(12) of the Companies Act, 2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, form part of this report. In terms of Section 136 (1) of the Companies Act, 2013, the Directorsâ report is being sent to the shareholders without this Annexure. The Shareholders interested in obtaining a copy of this annexure may write to the Company Secretary at the Companyâs registered office.
POLICY ON PREVENTION OF SEXUAL HARRASSMENT
The Company has in place a Policy for prevention of sexual harassment at workplace. This inter alia provides a mechanism for the resolution, settlement or prosecution of acts or instances of Sexual Harassment at work and ensures that all employees are treated with respect and dignity. There were no complaints filed / pending with the Company during the year.
GENERAL
During Financial Year 2017-18:
a. There were no public deposits accepted by the Company pursuant to provisions of the Companies Act, 2013, including rules thereunder.
b. There were no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Companyâs operations in future.
c. Neither the Managing Director nor the Whole-time Directors of the Company received any remuneration or commission from subsidiary.
d. The Company is in compliance with applicable Secretarial Standards.
AUDITORS a) Statutory Auditors
The members of the Company in its meeting held on 5 August 2016, re-appointed M/s. P. G. Bhagwat, Chartered Accountants, Pune, (Firm Registration Number 101118W) as Statutory Auditors of the Company for a second term of 5 consecutive years to hold office from Annual General Meeting (AGM) held on 5 August 2016 till the conclusion of the Annual General Meeting to be held in the year 2021, subject to the ratification by the members at every AGM.
Pursuant to the first proviso to Section 139 of the Companies Act, 2013, the appointment of the Statutory Auditors was required to be placed for ratification at every Annual General Meeting. The said proviso has been omitted by MCA vide its Notification dated 7 May 2018 with immediate effect.
The Company has received from them, the requisite certificate pursuant to Section 139 of the Companies Act, 2013 for Financial Year 2018-19.
There are no adverse remarks / qualifications of Statutory Auditors on financial statements for the year ended 31 March 2018.
b) Cost Auditors
The Company has appointed M/s. Parkhi Limaye & Co. as Cost Auditors of the Company for the Financial Year 2018-19 under section 148 of the Companies Act, 2013 and rules thereof.
c) Secretarial Audit Report
The Company had appointed Mr. M. J. Risbud, Practicing Company Secretary to conduct Secretarial Audit of the Company under section 204 of the Companies Act, 2013 and the rules thereof. The Secretarial Audit Report is annexed herewith as Annexure E.
There are no adverse remarks / qualifications of Secretarial Auditors in the Secretarial Audit Report for the year ended 31 March 2018.
MANAGEMENT DISCUSSION & ANALYSIS AND REPORT ON CORPORATE GOVERNANCE
The Management Discussion and Analysis and the Report on Corporate Governance as required under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, forms part of this Annual report.
A Certificate from the Statutory Auditors of the Company regarding compliance with conditions of corporate governance as required under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, also forms part of this Annual Report.
BUSINESS RESPONSIBILITY REPORT
Business Responsibility Report as required under Regulation 34(2)(f) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, forms part of this Annual Report.
DIRECTORSâ RESPONSIBILITY STATEMENT
Pursuant to Section 134 of the Companies Act, 2013, the Directors, based on the representations received from the Operating Management, confirm that:
a) In preparation of the annual accounts, the applicable accounting standards have been followed and that there are no material departures;
b) they have in the selection of the accounting policies, consulted the Statutory Auditors and have 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 as at 31 March 2018 and of the profit of the Company for the year ended on that date;
c) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding assets of the Company and for preventing and detecting fraud and other irregularities;
d) they have prepared the annual accounts on a going concern basis;
e) they have laid down internal financial controls to be followed by the Company and such internal financial controls are adequate and operating effectively; and
f) they have devised proper systems to ensure compliance with provisions of all applicable laws and such systems are adequate and operating effectively.
CAUTIONARY STATEMENT
Statements in this report, particularly those which relate to Management Discussion & Analysis, describing the Company''s objectives, projections, estimates and expectations may constitute âforward looking statementsâ within the meaning of applicable laws and regulations. Actual results may differ materially from those either expressed or implied.
ACKNOWLEDGEMENTS
The Directors would like to place on record their appreciation of the contribution made and support provided to the Company by the shareholders, employees, bankers, suppliers and customers.
For and on behalf of the Board of Directors
Sd/-
ATUL C. KIRLOSKAR
EXECUTIVE CHAIRMAN
Date: 18 May 2018
Place: Pune
Mar 31, 2017
REPORT OF THE DIRECTORS
To The Members
Of KIRLOSKAROILENGINES LIMITED
The Directors are pleased to present the Eighth Annual Report together with the Audited Statement of Accounts for the year ended 31 March 2017.
FINANCIAL RESULTS (STANDALONE)
(Rs, in crores)
Particulars |
2016-17 |
2015-16 |
Total Income |
2,960.18 |
2,718.37 |
Profit before exceptional items and tax |
252.30 |
230.46 |
Exceptional Items |
- |
25.48 |
Profit before tax |
252.30 |
204.98 |
Tax Expense (Current & Deferred Tax) |
78.68 |
39.67 |
Net Profit for the Period |
173.62 |
165.31 |
Other Comprehensive Income |
(0.58) |
(0.10) |
Total Comprehensive Income for the year, net of tax |
173.04 |
165.21 |
Profit Brought Forward |
806.15 |
815.83 |
Add: Net surplus in the statement of Profit & Loss balance of residuals undertaking of Kirloskar Brothers Investments Limited, transferred under Composite Scheme Arrangement and Amalgamation |
13.20 |
|
Profit Available for Appropriation |
979.20 |
994.25 |
Transferto General Reserve |
- |
14.05 |
Dividend and dividend distribution tax |
- |
174.05 |
Balance of the Profit carried forward |
979.20 |
806.15 |
COMPANYâS FINANCIAL PERFORMANCE
Despite an extremely challenging macroeconomic environment, your Company posted its highest net sales of Rs, 2614 crores as compared to the previous fiscal of Rs, 2406 crores. An increase of 9%. Profit from operations (before exceptional items) was Rs, 252 crores as against Rs, 230 crores in the previous year. The Profit After Tax was Rs, 174 crores as against Rs,165 crores in the previous year.
DIVIDEND
For the year under review, the Directors have recommended a dividend of 250% (Rs, 51- per share) for the year (PY Interim Dividend 250%, Rs, 5 per share). Total dividend payout for the year will be Rs, 87.03 crores, including payment of Rs, 14.72 crores, as dividend distribution tax.
SUBSIDIARY COMPANY AND CONSOLIDATED FINANCIAL STATEMENTS
KOEL Americas Corp., USA was established in 2015 with a strategic intent to penetrate into the North American market including USA and Canada as well asfocuson the Latin American region.
The revenues of KOEL Americas Corp. during fiscal year under review represents sale of fire pumps in United States of Americas (USA) and sale of Agri engines, Pumpsets, diesel engines and generators in Latin America. The FMUL Listed Engines for firefighting application represents 1/3rd of total revenues of KOEL Americas Corp.
KOEL Americas Corp. continues to explore new potential business partners for different products of order to expand its business operations.
To sell diesel engines in North America, an Environment Protection Agency (EPA) approval is required. KOEL Amercias Corp. is in the process of obtaining the same.
For the fiscal year ended 31 March 2017, the Sales Revenue was Rs, 15,98,629 (Rs, 10.71 Crs.). Profit from operations before Tax was Rs, 64,599 (Rs, 0.36 Crs.). The Profit after Tax was Rs, 50,836 (Rs, 0.27 Crs.).
The consolidated financial statements of the Company and its subsidiary, prepared in accordance with Ind-AS 110, issued by Institute of Chartered Accountants of India, forms part of this Annual Report. A statement containing the salient features of the financial statements of the subsidiary company is attached to the Financial Statements of the Company in Form AOC-1.
Pursuant to the provisions of Section 136 of the Companies Act, 2013, the financial statements of the Company, consolidated financial statements along with relevant documents and separate un-audited financial statements of its subsidiary are available on the Company''s website.
The annual accounts of the subsidiary and related detailed information will be kept for inspection by any shareholders at the Registered Office of the Company and will also be made available to the shareholders on demand, at any point of time.
DIRECTORS
a) Changes in Composition of the Board of Directors
During the year under review, the Board of Directors of the Company in its meeting held on 21 October
2016, re-appointed Mr. Atul C. Kirloskaras the Whole Time Director with designation as the Executive Chairman, for a term of 5 years with effect from 26 January 2017. A proposal for his re-appointment as the Executive Chairman and remuneration payable to him is being placed before the Members of the Company for their approval at the ensuing Annual General Meeting.
The Board of Directors of the Company in its meeting held on 21 October 2016, also re-appointed Mr. Gautam A. Kulkarni as the Whole Time Director with designation as Executive Vice Chairman for a term of 5 years with effect from 26 January 2017. A proposal for his re-appointment as the Executive Vice Chairman and remuneration payable to him is being placed before the Members of the Company for their approval at the ensuing Annual General Meeting.
The Board of Directors of the Company in its meeting held on 21 October 2016, also re-appointed Mr. Nihal G. Kulkarni as the Managing Director for a term of 5 years with effect from 26 January 2017. A proposal for his re-appointment as the Managing Director and remuneration payable to him is being placed before the Members of the Company for their approval at the ensuing Annual General Meeting.
In compliance with Section 149 of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Board of Directors of the Company appointed Mr. Satish N. Jamdar as Additional Director of the Company in the capacity of âNon-Executive Independent Directorâ effective 10 May 2017. In accordance with Section 161 of the Companies Act, 2013, he will hold office of Director up to date of ensuing Annual General Meeting. The Company has received requisite notice in writing from a member proposing his candidature for office of Director. The resolution seeking approval of the Members for the appointment of Mr. Satish N. Jamdar for term of 5 years, has been incorporated in the notice of the forthcoming Annual General Meeting of the Company.
In compliance with Section 149 of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Board of Directors of the Company re-appointed Mr. R. Srinivasan as âNon-Executive Independent Directorâ effective 12 August 2017. The Company has received requisite notice in writing from a member proposing his candidature for office of Director. The resolution seeking approval of the Members by special resolution for the re-appointment of Mr. R. Srinivasan for a second term of 5 consecutive years, has been incorporated in the notice of the forthcoming Annual General Meeting of the Company.
Mr. Rahul C. Kirloskar retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment.
The brief resumes and other details relating to the Directors who are proposed to be appointed I reappointed, as required to be disclosed under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, forms part of the Notice of Annual General Meeting.
b) Changes in Key Managerial Personnel
During the year under review, Mr. Atul C. Kirloskar, Executive Chairman, Mr. Gautam A. Kulkarni, Executive Vice Chairman and Mr. Nihal G. Kulkarni, Managing Director, were re-appointed as Key Managerial Personnel of the Company, with effect from 26 January 2017.
The present term of Mr. T. Vinodkumaras Chief Financial Officerand Key Managerial Personnel is upto 31 January 2018 as per retirement policy of the Company. His service as Chief Financial Officer and Key Managerial Personnel is being extended by 2 years with effect from 1 February 2018.
c) Declarations from the Independent Directors
The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence as prescribed under Section 149 (6) of the Companies Act, 2013 and Regulation 16(1)(b) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
d) Board Evaluation
In continuation of the process laid down in the previous year, members of the Board carried out a formal review for evaluating the performance and effectiveness of the Board, Committees of the Board and of the individual directors including the Chairman of the Board.
The performance of the Board was evaluated on the basis of criteria such as the board composition and structure, effectiveness of Board processes, participation in organization strategy including Long Range Plan and Annual Operating Plan, inorganic growth opportunity evaluation, Enterprise Risk Management etc.
Using appropriate criteria the performance of the various Committees was separately evaluated by the Board.
In a separate meeting of Independent Directors, performance of non-independent directors, performance of the Board as a whole and performance of the Chairman, taking into account the views of executive directors and non-executive directors, were evaluated.
A separate exercise was carried out to evaluate the performance of individual Directors including the Chairman of the Board, who were evaluated on parameters such as achievement against key performance objectives, attendance at meetings, time devoted for the Company, contribution in the Board process etc.
The Chairman of the Board and the Chairman of Nomination and Remuneration Committee had one-on-one meetings with the Directors. These meetings were intended to obtain Directors'' inputs on effectiveness of the Board/Committee processes.
e) Nomination and Remuneration Policy
The Board of Directors on the recommendation of the Nomination & Remuneration Committee has adopted a policy that lays guidelines for selection and appointment of Directors, Key Managerial Personnel and Senior Management personnel together with their remuneration. The Nomination and Remuneration Policy is annexed herewith as Annexure A.
f) Number of meetings of the Board
During the period under review, five (5) Board Meetings were held, the details of which forms part of Report on Corporate Governance.
g) Composition of Audit Committee
The Composition of Audit Committee forms part of the Report on Corporate Governance.
PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS
During the year under review, the Company has invested in equity shares of S L Kirloskar CSR Foundation. The details of which are given in the Financial Statements. The Company has not granted any Loans and Guarantees covered under Section 186 of the Companies Act, 2013.
PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES
All related party transactions that were entered into during the Financial Year 2016-17 were on an arm''s length basis and were in the ordinary course of business. Hence, there are no transactions to be reported in Form AOC-2. None of the related party transactions entered into by the Company, were materially significant, warranting members'' approval under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. All Related Party Transactions are routinely placed before the Audit Committee for approval after being duly certified by the Statutory Auditors.
The policy on Related Party Transactions as adopted by the Board is uploaded on the Company''s website.
The disclosures as per IND-AS 24 for transactions with related parties are provided in the Financial Statements of the Company.
RISK MANAGEMENT FRAMEWORK
The risk management process is embedded in the organization''s working methodologies and decision making process and is aligned to the Company''s Strategic Planning Process. The process involves identification, evaluation, mitigation and review of risks and opportunities both at business and enterprise level.
The risk management process is owned by the Internal Audit Department and is a comprehensive process that ensures coverage of major strategic, people related, environmental, economic and operational risks that could possibly derail achievement of the Company''s objectives and goals.
Risk owners, identified for each risk, prepare detailed mitigation plans which are formulated based on projects undertaken and in line with the Company''s goals, both short and long term. The enterprise risks and mitigation plans are reviewed by the Audit Committee and Board periodically.
The business risks are managed through cross functional teams from across businesses. These are reviewed by the business heads at periodic intervals.
INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO THE FINANCIAL STATEMENTS
The Company has an Internal Control Framework which is commensurate with the size, scale and complexity of its operations. Details of internal financial control and its adequacy are included in the Management Discussion and Analysis Report, which forms part of this Report.
CORPORATE SOCIAL RESPONSIBILITY
The Company has always believed in working for the betterment and upliftment of the society. Corporate Social Responsibility (CSR) has been practiced and engrained over the years in the Company. The focus areas under CSR have remained consistent over the years and include: Health, Education and Environment. The Company strongly believes in ''Enriching Lives'' of the people surrounding the communities in which it operates.
The Composition of CSR Committee of the Board and Report on CSR activities is annexed herewith as Annexure B.
VIGIL MECHANISM / WHISTLE BLOWER POLICY
The Company has a Vigil Mechanism/Whistle Blower Policy to deal with instances of fraud, unethical behavior, mismanagement etc. The Policy provides a mechanism for employees of the Company and other persons dealing with the Company to report to the Chairman of the Audit Committee any instance of unethical behavior, actual or suspected fraud or violation of the Company''s code of conduct. No person has been denied access to the Audit Committee in this regard. The Policy is uploaded on the Company''s website.
EXTRACT OF ANNUAL RETURN
The details forming part of the extract of the Annual Return inform MGT 9 is annexed herewith as Annexure C.
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE AND OUTGO
Information relating to conservation of energy, technology absorption and foreign exchange earnings and outgo as required under section 134 (3)(m)of the Companies Act, 2013, read with the rules there under, are provided in Annexure D to this report.
PARTICULARS OF EMPLOYEES
Disclosures pertaining to remuneration and other details as required under Section 197(12)of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are annexed in Annexure E of this report.
The particulars of employees pursuant to section 197(12) of the Companies Act, 2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, form part of this report. In terms of Section 136 (1) of the Companies Act, 2013, the Directors'' report is being sent to the shareholders without this Annexure. The Shareholders interested in obtaining a copy of this annexure may write to the Company Secretary at the Company''s registered office.
POLICY ON PREVENTION OF SEXUAL HARRASSMENT
The Company has in place a Policy for prevention of sexual harassment at workplace. This inter alia provides a mechanism for the resolution, settlement or prosecution of acts or instances of Sexual Harassment at work and ensures that all employees are treated with respect and dignity. There were no complaints filed / pending with the Company during the year.
GENERAL
During Financial Year 2016-17
a. There were no public deposits accepted by the Company pursuant to provisions of the Companies Act, 2013, including rules there under.
b. There were no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Company''s operations in future.
c. Neither the Managing Director nor the Whole-time Directors of the Company received any remuneration or commission from subsidiary.
AUDITORS
a) Statutory Auditors
The members of the Company in its meeting held on 5 August 2016, re-appointed M/s. P. G. Bhagwat, Chartered Accountants, Pune, (Firm Registration Number 101118W) as Statutory Auditors of the Company for a second term of 5 consecutive years to hold office from conclusion of the Annual General Meeting held on 5 August 2016, till the conclusion of the Annual General Meeting to be held in the year 2021, subject to ratification at every Annual General Meeting.
It is proposed to ratify their re-appointment as Statutory Auditors of the Company for FY 2017-18. The members are requested to ratify their re-appointment and authorize the Board of Directors to fix their remuneration. The Company has received from them, the requisite certificate pursuant to Section 139 of the Companies Act, 2013.
There are no adverse remarks /qualifications of Statutory Auditors on financial statements for the year ended 31 March 2017.
b) Cost Auditors
The Company has appointed M/s. Parkhi Limaye & Co. as Cost Auditors of the Company for the Financial Year 2017-18 under section 148 of the Companies Act, 2013 and rules thereof.
c) Secretarial Audit Report
The Company has appointed Mr. M. J. Risbud, Practicing Company Secretary to conduct Secretarial Audit of the Company for the Financial Year 2017-18 under section 204 of the Companies Act, 2013 and the rules thereof. The Secretarial Audit Report is annexed herewith as Annexure F.
There are no adverse remarks / qualifications of Secretarial Auditors in the Secretarial Audit Report for they ear ended 31 March 2017.
MANAGEMENT DISCUSSION & ANALYSIS AND REPORT ON CORPORATE GOVERNANCE
The Management Discussion and Analysis and the Report on Corporate Governance as required under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, forms part of this Annual report.
A Certificate from the Statutory Auditors of the Company regarding compliance with conditions of corporate governance as required under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, also forms part of this Annual Report.
BUSINESS RESPONSIBILITY REPORT
The Business Responsibility Report as required under Regulation 34 (2) (f) of SEBI (Listing Obligations and Disclosure Requirements), forms part of this Annual Report.
DIRECTORSâRESPONSIBILITY STATEMENT
Pursuant to Section 134 of the Companies Act, 2013, the Directors, based on the representations received from the Operating Management, confirm that:
a) In preparation of the annual accounts, the applicable accounting standards have been followed and that there are no material departures;
b) they have in the selection of the accounting policies, consulted the Statutory Auditors and have 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 as at 31 March 2017 and of the profit of the Company for the year ended on that date;
c) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding assets of the Company and for preventing and detecting fraud and other irregularities;
d) they have prepared the annual accounts on a going concern basis;
e) they have laid down internal financial controls to be followed by the Company and such internal financial controls are adequate and operating effectively; and
f) they have devised proper systems to ensure compliance with provisions of all applicable laws and such systems are adequate and operating effectively.
CAUTIONARY STATEMENT
Statements in this report, particularly those which relate to Management Discussion & Analysis, describing the Company''s objectives, projections, estimates and expectations may constitute âforward looking statementsâ within the meaning of applicable laws and regulations. Actual results may differ materially from those either expressed or implied.
ACKNOWLEDGMENTS
The Directors would like to place on record their appreciation of the contribution made and support provided to the Company by the shareholders, employees, bankers, suppliers and customers.
For and on behalf of the Board of Directors
Sd/-
Date :10May2017 ATULC. KIRLOSKAR
Place: Pune Executive Chairman
Mar 31, 2013
To, The Members of KIRLOSKAR OIL ENGINES LTD.,
The Directors are pleased to present the Fourth Annual Report together
with the Audited Statement of Accounts for the year ended 31 March
2013.
Financial Highlights
A. Statement of Profit & Loss
(Rs. in Crores)
Particulars 2012-13 2011-12
Total Revenue 2396.48 2362.54
Profit before exceptional and extraordinary
items and tax 289.93 233.00
Exceptional Items (19.08) 47.71
Profit before tax 270.85 280.71
Tax Expense (Current & Deferred Tax) 72.01 88.91
Profit for the Period 198.84 191.80
B. Appropriations
The Directors propose to appropriate the available surplus as follows:
(Rs. in Crores)
Particulars 2012-13 2011-12
Proposed Dividend 72.31 58.25
Corporate Tax on Dividend 12.29 9.45
Transfer to General Reserve 19.88 19.18
Closing Balance of Statement of Profit & Loss 367.91 273.25
C. Borrowings and Capex
(Rs. in Crores)
Particulars 2012-13 2011-12
Total borrowings NIL 168.96
Cash and cash equivalents 24.78 27.39
Capital expenditure 121.53 106.46
D. Financial Ratios
Financial Ratios 2012-13 2011-12
Return on capital employed (%) 23.7 24.7
Book value per share (Rs.) 80 71
Diluted earnings per share (Rs.) 13.7 13.2
Dividend payout ratio (%) 42.54 35.3
Financial Performance
In an increasingly challenging environment and continuing material cost
inflation, while sales increased marginally from Rs. 2,276 crores to
Rs. 2,319 crores, the profit from operations (excluding exceptional
items) rose from Rs. 233 crores to Rs. 290 crores, registering a good
increase of 24%. This was made possible through a combination of
rigorous cost restructuring and efficiency improvement programs that
yielded good results and helped the Company maintain profitable growth
in an otherwise difficult economic scenario.
Dividend
For the year under review, the Directors have recommend a dividend of
250% (Rs. 5 per share) for the year. (PY 200%, Rs. 4 per share). Total
dividend payout for the year is Rs. 84.60 crores, including payment of
Rs. 12.29 crores, as dividend distribution tax.
Buyback of Equity Shares
The Board of Directors, in their meeting held on 25 January 2012, had
approved a buyback of fully paid equity shares of the Company by open
market purchases through the stock exchange route at a maximum price of
Rs. 170 per equity share, with the aggregate buyback amount not
exceeding Rs. 73.625 crores. This represents 10% of the total paid up
capital and free reserves as per the latest audited balance sheet on 31
March 2011.
The Company has closed the buyback on 24 January 2013, after buying
back 10,15,424 equity shares for a total consideration of Rs. 15.67 Crs
(exclusive of transaction and other related costs), at an average price
of Rs. 154.34 per Equity Share.
Directors
R. R. Deshpande, Rahul C. Kirloskar and D. R. Swar retire by rotation
at the ensuing Annual General Meeting and being eligible, offer
themselves for re-appointment.
The brief resumes and other details relating to the Directors who are
proposed to be re-appointed, as required to be disclosed under Clause
49 of the Listing Agreement, form part of the Report on Corporate
Governance.
Corporate Governance
Pursuant to Clause 49 of the Listing Agreement, the Management
Discussion and Analysis and the Corporate Governance Report together
with the Auditors Certificate on compliance with the conditions of
Corporate Governance as laid down, forms part of this report.
Awards, Recognitions and Certifications
The manufacturing operations of the Company have always been recognized
for its quality delivery and operational excellence. In recognition,
- The Engineering Export Promotion Council (EEPC) conferred the
"Star Performer Award" to the Company for the fourth consecutive
time. The award was presented by Hon''ble Chief Minister of Goa, Shri
Manohar Parrikar in October 2012.
- The Company''s Digvijay Quality Circle (Kagal Plant) won the Three
Star award while the Lakshya and Utkarsh Quality Circles (Nashik plant)
won the Two Star awards, conferred at an international level
competition organized by the Malaysian Productivity Corporation, in
Kula Lumpur.
- The Vijayshree Quality circle Team (Pune Plant) bagged the 2nd
runner up prize at the INDIZEN -2013. INDIZEN- 2013 was the 4th
National convention on operational excellence, which was organized by
the Indian Business unit of the Kaizen institute, who are the global
leader in operational excellence.
Auditors
a. Statutory Auditors
The Statutory Auditors M/s. P. G. Bhagwat, Chartered Accountants, Pune
(Firm Registration Number 101118W) hold office till the conclusion of
the ensuing Annual General Meeting. It is proposed to re-appoint them
as Statutory Auditors for the Company for the FY 2013-14. The members
are requested to consider their re-appointment and authorize the Board
of Directors to fix their remuneration. The Company has received a
letter from them, stating that their appointment if made would be in
conformity to section224(1B) of the Companies Act, 1956.
b. Cost Auditors
Pursuant to the directives of the Ministry of Corporate affairs, your
Company has appointed M/s.Parkhi Limaye & Co. as Cost Auditors of the
Company under section 233B of the Companies Act, 1956.
c. Internal Auditors
The Internal Auditors M/s. Ernst and Young have conducted internal
audits periodically and submitted their reports to the management and
the Audit Committee. Their reports have been reviewed and addressed by
the management and the Audit Committee.
Directors'' Responsibility Statement
Pursuant to Section 217 (2AA) of the Companies Act, 1956, the
Directors, based on the representations received from the Operating
Management, confirm that:
i. In preparation of the annual accounts, the applicable accounting
standards have been followed and that there are no material departures;
ii. they have in the selection of the accounting policies, consulted
the Statutory Auditors and have 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 as at 31
March, 2013 and of the profit of the Company for the year ended on that
date;
iii. they have taken proper and sufficient care for the maintenance of
adequate accounting records in accordance with the provisions of the
Companies Act, 1956 for safeguarding assets of the Company and for
preventing and detecting fraud and other irregularities; and
iv. they have prepared the annual accounts on a going concern basis.
Listing Fees
The annual listing fees for the year under review have been paid to the
BSE Limited, Mumbai and to the National Stock Exchange of India
Limited, Mumbai where the Company''s shares are listed.
Statutory Disclosures
Information relating to conservation of energy, technology absorption
and foreign exchange earnings and outgo as required under section
217(1) (e) of the Companies Act, 1956 read with the rules there under
is presented in Annexure A to this report.
As required under section 217 (2A) of the Companies Act, 1956, read
with the Companies (Particulars of Employees) Rules, 1975, a statement
giving required information relating to the employees covered there
under is given in Annexure B to this report. As per the provisions of
section 219 (1) (b) (IV) of the said Act, these particulars will be
made available to shareholders on request.
Cautionary Statement
Statements in this report, particularly those which relate to
Management Discussion and Analysis, describing the Company''s
objectives, projections, estimates and expectations may constitute
"forward looking statements" within the meaning of applicable laws
and regulations. Actual results may differ materially from those either
expressed or implied.
Acknowledgments
The Directors would like to place on record their appreciation of the
contribution made and support provided to the Company by the
shareholders, employees, bankers, suppliers and customers.
For and on behalf of the Board of Directors
ATUL C. KIRLOSKAR
Executive Chairman
Date : 26 April 2013
Place : Pune
Mar 31, 2012
The Directors have the privilege of presenting the Third Annual Report
of the Company for the year ended March 31, 2012. Financial
Performance
A. Statement of Profit & Loss
(Rs In Crores)
Particulars 2011-12 2010-11
Total Revenue 2362.16 2435.38
Profit before exceptional and extraordinary
items and tax 233.27 247.46
Exceptional Items 47.71 (3.73)
Profit before tax 280.98 243.73
Tax Expense (Current & Deferred Tax) 89.18 70.00
Profit for the Period 191.80 173.73
B. Appropriations
The Directors propose to appropriate the available surplus as follows:
(Rs In Crores)
Particulars 2011-12 2010-11
Proposed Dividend 58.25 58.25
Corporate Tax on Dividend 9.45 9.45
Transfer to General Reserve 19.18 17.38
Closing Balance of Statement of Profit & Loss 273.25 168.33
C. Borrowings and Capex
(Rs in Crores)
Particulars 2011-12 2010-11
Total borrowings 168.96 248.99
Cash and cash equivalents 27.39 22.93
Capital expenditure 106.46 107.42
D. Financial Ratios
Financial Ratios 2011-12 2010-11
Return on capital employed (%) 24.7 23.2
Book value per share (Rs) 71 61
Diluted earnings per share (Rs) 13.2 11.9
Dividend payout ratio (%) 35.3 39.0
E. Divesture of the Bearing Business Division
On September 30, 2011, the Company divested its Bearings Business
division to KSPG Automotive India Private Limited, for a purchase
consideration of Rs 87 crores resulting in a profit of Rs 47.71 crores
(shown under exceptional items).
Dividend
The Directors recommend a dividend of 200% (Rs 4/- per share) for the
year. (PY 200%, Rs 4 per share)
Total dividend payout for the year is Rs 67.70 crores, including payment
of Rs 9.45 crores, as dividend distribution tax.
Buyback of Equity Shares
The Board of Directors, in its meeting held on January 25, 2012, had
approved a buyback of fully paid equity shares of the Company by open
market purchases through the stock exchange route at a maximum price of
Rs 170 per equity share, with the buyback amount not exceeding Rs 73.625
crores. This represents 10% of the total paid up capital and free
reserves as per the latest audited balance sheet on March 31, 2011.
The Company had issued a Public Announcement in compliance with the
SEBI (Buyback of Securities) Regulations, 1998, (as amended) on
February 17, 2012 and corrigendum to the Public Announcement on March
2, 2012, pursuant to the letter issued by SEBI.
The buyback commenced on March 5, 2012 and will remain open till
January 24, 2013 or any earlier date on which the buyback to the extent
of Rs 73.625 crores is completed. However, in case Minimum Offer Shares
(10,82,721 nos.) are purchased under the buyback, the Board at its
discretion may close the buyback by giving appropriate notice in this
regard.
As on April 25, 2012, the Company had not bought back any equity
shares.
Directors
Independent Non Executive Directors U. V. Rao, R. Srinivasan and M.
Lakshminarayan retire by rotation at the ensuing Annual General Meeting
and being eligible, offer themselves for re-appointment.
Atul C. Kirloskar has resigned as the Managing Director of the Company
with effect from the close of working hours of January 25, 2012. The
Board of Directors of the Company, in its meeting held on January 25,
2012, appointed him as the Executive Chairman for a period of 5 years
beginning January 26, 2012. A proposal for his appointment as the
Executive Chairman and remuneration payable to him is being placed
before the Members of the Company for their approval at the Annual
General Meeting.
Gautam A. Kulkarni has resigned as the Joint Managing Director of the
Company with effect from the close of working hours of January 25,
2012. The Board of Directors of the Company, in its meeting held on
January 25, 2012, appointed him as the Executive Vice Chairman for a
period of 5 years beginning January 26, 2012. A proposal for his
appointment as the Executive Vice Chairman and remuneration payable to
him is being placed before the Members of the Company for their
approval at the Annual General Meeting.
The Board of Directors of the Company, in its meeting held on January
25, 2012, appointed Nihal G. Kulkarni as the Managing Director of the
Company for a period of 5 years beginning January 26, 2012. A proposal
for his appointment as the Managing Director and remuneration payable
to him is being placed before the Members of the Company for their
approval at the Annual General Meeting.
The brief resumes and other details relating to the Directors who are
proposed to be appointed/re-appointed, as required to be disclosed
under Clause 49 of the Listing Agreement, form part of the Report on
Corporate Governance.
Directors' Responsibility Statement
Pursuant to Section 217 (2AA) of the Companies Act, 1956 the Board of
Directors state that:
- In preparation of the annual accounts, applicable accounting
standards have been followed along with proper explanations relating to
material departures;
- The Directors have selected such accounting policies, 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 and
of the profit of the Company at the end of the financial year;
- The Directors have taken appropriate care for the maintenance of
adequate accounting records in accordance with the provisions of the
Companies Act, 1956 for safeguarding assets of the Company and for
preventing and detecting fraud and other irregularities; and
- The Directors have prepared the annual accounts on a going concern
basis.
Listing Fees
The annual listing fees for the year under review have been paid to the
BSE Limited, Mumbai and to the National Stock Exchange of India
Limited, Mumbai where the Company's shares are listed.
Corporate Governance
A report on Corporate Governance along with the certificate of
compliance from the Auditors forms part of this report.
Internal Audit, Internal Controls & their Adequacy
The Company's internal audit is carried out by a renowned auditing firm
as per the plan approved by the Audit Committee. The Internal Audit
Plan covers extensive review of the Company's operations. Periodically,
the Company's management reviews internal audit observations and major
findings in the Audit Committee meeting.
The Company has established a strong internal controls framework for
key business processes across business units which are tested and
validated during the internal audit. Significant findings and action
plans are presented to the Audit Committee for their review.
Auditors
You are requested to appoint Auditors for the current year. The
retiring Auditors M/s. P. G. Bhagwat, Chartered Accountants, Pune (Firm
Registration Number 101118W) are eligible for re-appointment.
Statutory Disclosures
Information relating to conservation of energy, technology absorption
and foreign exchange earnings and outgo as required under section
217(1) (e) of the Companies Act, 1956 read with the rules there under
is presented in Annexure A to this report.
As required under section 217 (2A) of the Companies Act, 1956, read
with the Companies (Particulars of Employees) Rules, 1975, a statement
giving required information relating to the employees covered there
under is given in Annexure B to this report. As per the provisions of
section 219 (1) (b) (IV) of the said Act, these particulars will be
made available to shareholders on request.
Corporate Social Responsibility (CSR)
The Company conducts yearly Community Perception Surveys (CPS) to
assess its perception as a Corporate Citizen among communities in the
vicinities of its operations. The CPS rating in Financial Year 2011-12
showed a significant improvement over the previous year. The Company
has, as a policy, chosen health and education as primary areas of focus
for its CSR initiatives.
In addition to CSR highlights mentioned in last year's report, the
following new initiatives were employed during Financial Year 2011-12:
- Health awareness programmes on adolescent health and hygiene
- Provision of school material to primary school children
- Workshop for teachers and students on team building, career
guidance
- Waste Management workshop
- "Hasat Khelat Paryavaran" events in Pune and Kagal to develop
environmental awareness
- Livelihood generation training for self-help groups
- Life skills training programmes
- Vocational training programmes for the youth
- Support to the Kirloskar Foundation for their programmes Awards,
Recognitions & Certifications
During the Financial Year 2011-12, the Company received the following
awards, recognition and certifications:
- The Commendation Certificate for Strong Commitment to Excel from
CII. This award is a testament to the efforts and commitment of the
Company to attain world class standards of performance.
- For the second consecutive year, the Engineering Export Promotion
Council (EEPC) conferred its award to the Company. This award is
sponsored by Ministry of Commerce & Industry, Government of India.
- Participated in the national convention on Quality Concept 2011
organized by the Quality Circle Forum of India. The Pune plant received
the Par Excellence Award.
- The Pune and Kagal plants received the prestigious '12th National
Award for Excellence in Energy Management 2011' from the Confederation
of Indian Industries (CII).
- KAIZEN on DV Cylinder Head won 1st prize at the national level in
"INDIZEN 2012" contest.
- QCFI, Pune Chapter Trophy for the Financial Year 2010-11 for
spreading Quality Circle activities across the organization
- The Pune and Nashik Plants received the MEDA ENCON award
- "Gurukul" (the Company's training centre) at the Kagal Plant
received 'Best Prax Benchmark 2011 Award' in the manufacturing
category.
Concerns and Threats
India's off highway engines market slowed down to 14% in Financial Year
2011-12. The market demand was adversely affected by factors such as
poor availability of funds, which in turn hampered growth in the
housing segments, delayed closure of highways projects by NHDP, scams
related to the mining sector etc.
Apart from the overall slowdown in the market, during Financial Year
2011-12, a major customer of the Company commenced in-house manufacture
of diesel engines. To compensate for this loss, the Company has
aggressively begun expanding its customer base and applications
portfolio. The Company successfully stabilized manufacture and supply
of BS-III engines to over 55 applications during the first quarter of
the last fiscal.
The off highway market continues to be bearish and is likely to regain
its buoyancy towards the beginning of the third quarter of the current
fiscal. The Company anticipates the inflationary trend to pick-up in
the coming months. The Company is gearing up to effectively address the
cost pressures and enhance its operational efficiency.
The Company's engines and pump sets for the agriculture segment have
shown a better performance and low total cost of ownership. This is in
comparison to the products of its competitors. Also, the Company's
products are priced at an average premium of 35% - 40%.
However, the Company faces stiff competition from low cost Chinese
imports and from unorganized Indian players. Availability of
Government subsidies for diesel pump sets in most of the agriculture
market plays a vital role in generating a demand for our agriculture
pump sets.
India's peak power demand continues to grow at approximately 8%
annually, the associated power shortage during high peak will raise
demand for diesel gensets in the near future. Import of low cost diesel
generators has resulted in increased competition from global players in
the lower kVA range.
The Company's business plans in the telecom business were not realized
on account of low level of buying by telecom operators. Non telecom
market movement was lower in the first two quarters, however the
Company responded to market needs and achieved growth in the third and
fourth quarters.
On the regulatory front, the Government of India is considering
revision of emission norms by June 2013. All engine manufacturers will
have to upgrade the design of engines to conform to the new emission
standards. The Company is confident that its products will meet the
required emission norms.
Increased competition in the higher kVA product range from
international players venturing into the Indian genset market is
expected. The Company is currently in the process of developing engines
for higher kVA DG sets and is confident that these will meet customer
requirements and will feature enhanced operational and performance
parameters.
The stationary power plant segment of the large engine business group
was adversely affected by high furnace oil prices in Financial Year
2011-12. Generation of power at those prices became uneconomical for
the customers. This situation continues to be an area of concern.
Prospects for the Current Year
For the current financial year, the Company has a cautious outlook on
the economy, considering the anticipated rise in crude oil prices and
inflationary pressures in the economy, especially in Coke and Steel.
The Government of India continues to put great emphasis on
infrastructure, especially the urban infrastructure and national
highways. The Union Budget 2012-13 envisages 8,800 kms of road
constructions with a total outlay of Rs 25,000 crores.
In the power generation segment, the estimated demand and supply gap of
around 8%, together with continuing improvement in lifestyles will
sustain the business growth. Growth in service and manufacturing
sectors is also expected to trigger the demand for generator sets.
Besides conventional power generation, the Government of India has
announced setting up of new nuclear power plants. The Company has
already taken a lead in this area by winning orders worth Rs 396 crores
to supply gensets to the Nuclear Power Corporation of India over the
next 3 years. The demand for DV series engines is rising and this
product segment is expected to perform better in the current financial
year.
Cautionary Statement
Statements in this report, particularly those which relate to
Management Discussion and Analysis, describing the Company's
objectives, projections, estimates and expectations may constitute
"forward looking statements" within the meaning of applicable laws
and regulations. Actual results may differ materially from those either
expressed or implied.
Acknowledgements
The Directors would like to place on record their appreciation of the
contribution made and support provided to the Company by the
shareholders, employees, bankers, suppliers and customers.
For and on behalf of the Board of Directors
ATUL C. KIRLOSKAR
Executive Chairman
Date: 26 April 2012
Place: Pune
Mar 31, 2011
The Directors have the privilege of presenting the Second Annual Report
of the Company for the year ended 31 March 2011.
LISTING OF COMPANYS SHARES POST DEMERGER
After the scheme of arrangement for Demerger became effective on 31
March 2011, the Company filed an application with Bombay Stock Exchange
Limited (BSE), Mumbai and National Stock Exchange of India Limited,
(NSE) Mumbai for listing of 145,629,285 equity shares of Rs. 2/- each
on 15 June 2010. After completing the necessary formalities, equity
shares of the Company were permitted for listing and trading on BSE and
NSE with effect from 24 December 2010.
Pursuant to the said Scheme, the fractional entitlements arising out of
the issue of shares under the said Scheme were consolidated into 5,915
equity shares of Rs. 2 each. These shares were sold in the open market
at an average price of Rs. 147.19. The Company is in the process of
distributing the net sale proceeds (after deduction of the expenses
incurred) to the members respectively entitled to the same in
proportion to their fractional entitlements, as far as practicable
along with the final dividend received on the said consolidated equity
shares, for the period ended 31 March 2010.
FINANCIAL PERFORMANCE
(Rupees in 000s)
2010-11 2009-10
Total Income 24,353,735 22,691,722
Total Expenditure 21,877,039 20,057,176
Profit before exceptional items & taxation 2,476,696 2,634,546
Exceptional (Income) / Expenses 37,253 Nil
Profit before taxation 2,439,443 2,634,546
Provision for tax (including Deferred Tax) 702,141 994,419
Net Profit 1,737,302 1,640,127
Surplus (After other adjustments) 2,534,148 1,640,127
Appropriations
Your Directors propose to appropriate the available surplus as follows:
(Rupees in 000s)
Particulars 2010-11 2009-10
Proposed Dividend 582,519 582,519
Corporate Tax on dividend 94,499 96,749
Transfer to General Reserve 173,800 164,013
Balance carried to Balance Sheet 1,683,330 796,846
Dividend
The Directors recommend a dividend of 200% (Rs.4/- per share) for the
year.
WORLD ECONOMY
RBI has projected growth of global economy of 4.4% for the calendar
year 2011 and 4.5% for 2012. The rising commodity prices and
inflationary pressures would be the cause of concern for emerging and
developing economies. It has also projected more than 30% rise in
global crude oil prices during the calendar year 2011. This is a key
downside risk to the growth of the global economy. Sovereign balance
sheet risks in the Euro zone and dormant real estate markets have also
been cited as downside risks to growth in advanced economies.
INDIAN ECONOMY
The Indian Economy continued to outperform most emerging markets during
the year under review, retaining its position as the second fastest
growing economy, after China, amongst the G-20 countries. The real GDP
growth rate is estimated at 8.6%. The main impetus to the growth came
from agriculture (growth of 5.7% as against 0.2% for the previous
financial year) which benefitted from a normal monsoon, while industry
(growth of 8.7% as against 6.4% for the previous financial year) and
services (growth of 9.3% against 9.5% for the previous financial year)
registered mild deceleration. The focus of the Indian Government during
the current financial year will be towards infrastructure development
as reflected in increased allocation of 48.5% of total plan allocation
as against 23.3% for previous year. The Government also proposes to
boost the share of manufacturing in economy from 16% to 25% over the
next 10 years.
MANAGEMENT DISCUSSION & ANALYSIS
The operations of the Company comprise of Engines and Bearings business
and operational performance review is carried out separately for these
segments.
Industry Overview
While global economies are still recovering, Indian economy has
comparatively shown a faster recovery. In the year under review, the
Indian export sector has shown a growth of approx 50% in volume terms
and 37% in value terms over the previous financial year. The
engineering sector has significantly contributed to the growth in
exports.
Growth of investment in agriculture and industries such as retail,
hospitality, hospitals, IT, banking and infrastructure is evident in
the current financial year. This generated a good demand for our
engines, pump sets and generating sets. However due to continual
increase in prices of crude oil, customers could also prefer alternate
fuels for engines.
The growth of telecom Industry in India peaked in 2008-09. This was
followed by a period during which the telecom companies separated the
activity of telecom towers management into a separate business. The
previous financial year saw consolidation of the tower management
businesses. As a result of the consolidation, saturation of telecom
density in the urban areas and less than expected growth in the rural
areas, the demand for generating sets went down considerably. Other
than the telecom industry, demand for generating sets for power
generation has shown a steady growth. The competition for generating
sets below 30kVA range has further intensified during the year under
review.
Company Performance
During the year under review, your Company achieved sales of Rs. 2,363
Crs. (Previous Year Rs. 2,219 Crs.) resulting in increase in sales by
6.5 % over previous year.
The profit before tax is at Rs. 244 Crs. (Previous Year Rs. 263 Crs.)
after providing for depreciation of Rs. 85 Crs. (Previous Year Rs. 84
Crs.)
Business wise analysis is presented below:
BUSINESS WISE OPERATIONAL PERFORMANCE
Your Company caters to the diverse needs of the customers from all the
three sectors of economy namely Agriculture, Industrial and Services.
A. ENGINE BUSINESS
1. Agriculture & Off Highway Engine Business
While agriculture sector grew by 5.4% due to progressive governmental
policies during the year under review, the Indian agriculture market
for engines below 20HP shrunk by 15% in numbers, due to the delay in
onset of monsoon and monsoon continuing through the sowing period. The
market share was enhanced in the agriculture segment from 17% to 21%
despite the drop in total market volume. A total of more than 76,000
engines were sold in the Agricultural market, out of which 30,000 were
portable pump sets which were launched in the year 2008, despite facing
competition from cheaper Indian and Chinese alternatives. High head
portable pump sets were introduced for the agriculture market.
The growth of Indias construction equipment industry is directly
linked to the growth of the countrys economy, since it is driven by
increased investments in the infrastructure and related sectors.
Construction equipment industry (primarily comprising of backhoe, crane
and excavators etc., used in the Off Highway segment) has shown a
growth of 20% during the year under review. In the Off Highway Market,
the Company grew by 21% driven by robust domestic demand. Besides this,
bulk supplies were started to new customers acquired in the previous
financial year. Such supplies accounted for 10% of the total supply to
the Off Highway Markets. The proactive measures resulted in enhancing
its market share in the domestic market.
Your Company successfully geared up for the BS-III emission norms now
applicable for Construction Equipment Vehicles [CEV], by migrating over
55 applications from BS-II to BS-III.
Overseas agriculture & Off Highway market also experienced revival in
demand; especially in the West Asia & African markets. During the year
under review, acquisition of a major OEM customer in South African
mining market strengthened our market position. Internationally,
Agriculture & Off Highway markets recovered during the year under
review. The marketing strategy will address the demand in the focus
markets and will also enable the Company and its business partners to
tap the potential business in this market.
2. Power Generation Engine Business
The power generation business of the Company addresses the telecom and
other industrial segments such as retail, banking, IT and telecom
markets. During the year under review the domestic power generation
market, except the telecom segment, experienced a revival in demand.
Overall market, other than the telecom segment, grew by around 15%.
Your Company continuously innovates to bring down the life cycle cost
of the products thereby providing value for money to our customers. The
newly designed DV series of engines in the range of 320 kVA to 625 kVA
were successfully launched in the domestic market. Our Research &
Development is working on extending the range to 750 kVA
New products were developed in the range of up to 160 kVA, which run on
alternate energy sources like natural gas and bio gas.
The global economic meltdown seems to be easing up in the overseas
markets served by the Company. Increased efforts in the overseas
markets in the industrial segments resulted in acquisition of new
customers, in Africa, Middle-East & South East Asia and the Indian sub
continent. Company has increased its presence in key geographical
locations in countries such as UAE, Nigeria, South Africa & Kenya.
3. Customer Support Business
Your Company has a widespread network of trained service dealers and
well equipped service outlets all over India. The network enables us to
respond to customer calls upto 50 km range within 4 hours and beyond 50
km range within 8 hours.
Growth was achieved in Agriculture Spares segment by increasing the
number of parts distributors and increasing focus on availability of
parts.
New initiatives and constant up-gradation of systems and procedures
helped the Company in securing customer confidence and also gaining
over 21% growth in spare parts sale over the previous year and also
additional revenue generation through annual maintenance contracts with
cellular operators as well as domestic customers.
4. Large Engine Business
During the year under review, engines were supplied for main propulsion
application and for stationary power plant application. In the
stationary power plant market segment, high fuel oil prices adversely
affected new orders as well as operations of existing engines installed
with the customers.
Commissioning of previously supplied engines on the naval vessel
frigates built at Mazagaon docks was successful. Four generating sets,
each of 3.6 MW rating, are successfully installed at the Kalpakkam
Nuclear Power Plant, which are awaiting final commissioning.
5. Kagal Plant
During the year under review, in the fourth year of operation, the
production of engines increased by 53% and production of generating
sets increased by 15% over the previous year.
Generating sets of 400 kVA and 500 kVA using the new DV series engines
were successfully manufactured.
15 Nos. of 500 kVA generating sets were supplied by our OEMs for
powering the opening and closing ceremonies of the Common Wealth games
at New Delhi.
Company successfully added 46 engine application codes to fulfill the
needs of the Customers in Off Highway and Power Generation businesses.
2600 rpm portable pump sets were successfully manufactured within the
existing set up.
Productivity improvements and measures for increasing flexibility in
manufacturing processes were introduced to meet the fluctuating market
demands.
6. Pune Plant
During the year under review, your Company has renovated and upgraded
its manufacturing facilities. The plant renovation activity was
completed successfully without affecting deliveries to customers. Due
to this renovation, improvement is expected in labour and plant
productivity.
The plant undertook proto, pilot and production batch proving of DV
series of Engines. The Pune plant provided 106 new application codes
including proto and pilot of BS-III compliant R1040, 4R810, 6R1080 and
HA medium Engines. SL90 Engines with FM & UL certification were
successfully handed over for commercial production.
During the year under review, 12 innovative low cost automation
projects were completed and the plant achieved more than 8500 nos. of
Kaizens.
The Quality circle from Pune plant was selected for excellent category
in Quality Circle Contest at National level. It also bagged Silver
trophy at international Quality Circle contest.
7. Rajkot Plant
During the year under review, the manufacturing capacity for engines
was increased to 10,000 engines/ month.
The plant achieved BIS certification for 5HP to 8HP engines with
N-series pumps
B. BEARINGS BUSINESS
The automobile industry continued to be buoyant and provided
opportunities for growth in the business. During the year under review,
the automobile sector grew at an average of 9%. The sales of the
bearings division for the year under review amounted to Rs. 123 Crores,
an increase of 15% over the previous year.
Market share increased to 36% of the OEM market and to 41% in the
aftermarket. The after-market segment has grown significantly due to
increase in vehicle population.
The Company has made adequate investment in technology, infrastructure
and quality, which will enhance customer satisfaction.
C. RESEARCH AND ENGINEERING
1. New Products and Product Development
Your Company strives to fill the product gaps by continuously
developing new products and upgrading existing products. The solutions
are being constantly optimized to minimize inputs and maximize outputs.
The Company has successfully launched K-1080 engine covering 140 to 160
kVA.
Two models of DV range are successfully handed over for commercial
production to cover product ranges from 320 kVA to 625 kVA. Variants
with speed of 1800 rpm are also under development.
New variant of portable pump set at 2600 rpm handed over to production
to meet higher head requirements.
New applications have been developed for R-810 series engines which
have been introduced in production.
An investment of more than Rs. 20 Crores was made in upgrading Research
and Development facilities in view of upcoming stringent emission
norms.
2. Emission
BS-III norms for construction equipment are effective from 1st April
2011. The company has developed cost effective and user-friendly
solution and all the engines have been certified for these norms and
proto samples were supplied to customers.
3. Alternate Fuels
During the year under review, the Company has developed CNG Generating
sets up to 160kVA which have been successfully installed at different
sites.
Company is actively pursuing the development of engines with bio-fuels
like bio-gas and straight vegetable oils (SVO) in the range below 20HP.
D. INDUSTRIAL RELATIONS
The Company continues to maintain and improve its healthy and
harmonious Industrial Relations.
Kirloskar Oil Engines Limited was selected jointly by Maratha Chamber
of Commerce, Industries and Agriculture (MCCIA) and Rotary Club of
Poona West, for their newly introduced "BEST EMPLOYEES RESPONSE AWARD "
in large industry category, Pune.
Your Companys achievement of signing the 6th consecutive wage
settlement in time and without losing even a single production man day
in last 50 years (Considering Pre and Post Demerger period) was
recognized by a major publication. This is a unique achievement for any
manufacturing company in India.
Our Employees health is of prime importance to the Company. Medical
check-up of employees is carried out regularly. Company regularly
conducts lectures on health, fitness, common ailments and diseases and
life style improvement with a view to enhance employee awareness.
Development of employees is an important focus area for the company.
Employees are encouraged to participate in programmes such as Out-Bound
Training, team building, and also various sporting and cultural
activities within and outside the Company.
E. ENVIRONMENT, OCCUPATIONAL HEALTH & SAFETY (EHS)
Environment
The Company continues to be recognized for its commitment towards the
environment.
- Pune plant is certified for EMS, ISO 14001: 2004 (Environmental
Management System), an international certification standard, since
1999.
- Pune plant is certified for OHSAS-18001:2007 (Occupational Health &
Safety Management System), an international certification standard,
since 2009.
- Kagal plant is certified for EMS, ISO 14001:2004 (Environmental) &
OHSAS-18001:2007 (Occupational Health & Safety Management System)
Integrated Management System, since 2009.
- At Kagal 2033 trees have been planted to protect the environment
- Nashik Plant is certified for EMS, ISO 14001:2004 (Environmental) &
OHSAS-18001:2007 (Occupational Health & Safety Management System)
Integrated Management System in Jan, 2010.
- ANagar Plant is certified for EMS, ISO 14001:2004 (Environmental) &
OHSAS-18001:2007 (Occupational Health & Safety Management System)
Integrated Management System in Jun, 2010.
- Implementation of Environmental (EMS) & OHSAS (Occupational Health &
Safety Management System) is in process at Rajkot Plant.
EHS Improvements
Your Companys maiden Corporate Sustainability report for the year
2009-10, was released in the public domain on 7th March 2011. Kirloskar
Oil Engines Limited is the first engine manufacturing company in India,
to release this report and receive highest level check certification of
A+ from Global Reporting Initiative (GRI), Netherlands. This rating
testifies your Companys position as an environmentally conscious
company, integrating business principles with sustainable development.
Kirloskar Oil Engines Limited has been honored with Parivartan
Leadership Award for Sustainability-2011 in automotive sector. This
award, organized by India Carbon Outlook, seeks to recognize Indian
companies who have embraced sustainability in their business operations
and supply chain. These companies have shown leadership by taking
initiatives for making their products, processes and facilities
sustainable.
In the year under review, following EHS improvement measures were
implemented.
- Upgradation of paint booth in Pune plant to eliminate air and land
pollution due to paint dust
- Systematic disposal of waste Glass wool (2.9 MT) & used Asbestos
sheets (190 MT)
- Installation of transparent roof sheets for enhanced illumination
level & use of natural day light in R-HA Machine shop & Tech Center.
- Installation of turbo vents for improved ventilation in Pune Plant.
- Initiated detailed study on Carbon foot print for all the plants
Based on the finding of Electrical Safety Audits conducted by National
Safety Council (NSC) at Pune, Kagal, Nashik & Rajkot plants, detailed
action plan is under implementation.
Following measures were taken to increase awareness amongst employees
on EHS:
a) Various competitions were conducted
b) Experts lectures and seminars arranged on Energy Conservation
(ENCON), EHS at all locations
c) Environment Day celebration (No Vehicle Day)
F. HUMAN RESOURCES
During the year, a number of initiatives were taken in the area of
human resource development.
The Company conducts Employee Engagement Survey through Gallup India
every year. The Gallup Survey for the year 2011 was conducted in
January 2011. The findings of the survey are used to develop the
concrete action plan for increasing employee engagement.
The Performance Management System for managers was reframed and
implemented. Job Evaluation exercise was initiated to create a role
based level matrix in senior management grades. With a view to develop
future leadership pool, 20 managers were nominated for Leadership
Development Programme, jointly developed with leading management
institute. Similarly, Middle Management Development Programme was
initiated in collaboration with Kirloskar Institute of Advanced
Management Studies.
As a part of the Companys effort to improve skill and competency
levels of managers, specially designed need based training programmes
were conducted in various functional areas.
G. CORPORATE SOCIAL RESPONSIBILITY (CSR)
Your Company firmly believes in contributing to the well being of
society through its CSR initiatives in the surrounding communities with
a clear focus on Health, Education, Environment and Livelihood at all
plant locations.
- Sponsored education of children from Akanksha Foundation
- Computer Literacy Program for children
- Career Guidance Workshops for students
- Health Awareness Program like De-Addiction, HIV/Aids Awareness,
Healthy Diet
- Celebrated "Joy of Giving" Week
- Free Health Check up Camps
- Tree Plantation
- PUC Check up camps
- Environment Fair at Community
- ENCON Initiatives
- Workshops on income Generation for Self Help Groups
- Livelihood Advanced Business School Training programmes through CII
YI group & Dr.Reddys Foundation
H. COST CONTROL
Cost control and cost reduction measures continued to be focus area.
This has helped the Company in partly offsetting Inflationary
pressures. Value Engineering, Value Analysis and Process Re-engineering
were the major initiatives undertaken. Effective control on the costs
across the supply chain has helped the Company to optimize the material
cost.
I. QUALITY ASSURANCE
Several key processes were strengthened and also undertaken several
initiatives like "Six sigma programs which are being pursued as a part
of continuous improvement process were undertaken. The Company has 139
Green belt holders and 50 certified Black belt holders in the year
under review.
Supplier Quality improvement is a focus area for the Company. Towards
this end, the concept of Quality Capacity was emphasized throughout
the Companys supply base and also during the Annual Supplier
Conference.
The Company provides training to suppliers on quality tools like "Six
Sigma" through six sigma black belt internal trainers certified by CII.
The Initiatives like Supplier Quality Task Force were implemented. As a
result of the efforts put in, the trend for supplier quality
performance, measured in terms of defective parts per million (PPM) is
showing continuous improvements.
For the last few years Supplier Quality Contest has been conducted.
This provides recognition for the efforts put in by suppliers in
continuous improvement activities as well as in sharing best practices
among supplier partners. The number of customer complaints has reduced
by more than 20% for almost the entire product range.
J. BUSINESS EXCELLENCE
For the second consecutive time, your Company has received the
Commendation Certificate from CII EXIM for Strong Commitment to Excel.
In the pursuit of organisation excellence, this award is a testament to
the efforts & commitment of our employees to attain world class
performance.
CONCERNS & THREATS
With the growth momentum in the domestic market, India is an attractive
market for most of the Global players in generating sets business.
Entry of low cost manufacturers in the lower end of the market has led
to a fierce price competition and entry of global players in the higher
range has generated intense competition in that segment. This is likely
to put pressure on the margins of the products in the short and medium
term.
The demand for generating sets from the telecom markets is expected to
remain sluggish during the current financial year.
In order to overcome market challenges Company is focusing on expanding
the business in overseas markets and in new product segments like
alternate fuel engines, defense, marine auxiliary generating sets etc.
The pump-sets manufactured by your Company have a better performance
and lower cost of ownership than the competition. Availability of
Government subsidies for diesel pump-sets in some of the Indian
Agricultural Markets is critical and can impact the demand for these
products. The competitive pressures in the Agricultural Market are on
the rise and as a result, margins for these products will be under
pressure. Company continues to work towards mitigating this threat
through several cost control measures.
The inflationary trend which started in the last quarter of the year
under review, especially in the Metals Market, is showing no signs of
softening. Further due to tightening of the credit policy by RBI, money
flow in the retail market is getting restricted. As a result, the
demand for the Off Highway equipments is anticipated to taper down in
the short term. We will continue to monitor the emerging scenario,
pick-up the early warning signals and update business plans.
Several Global Players in the Off Highway markets have set up their
operations in India. Thus the competitive landscape in the Equipment
Market is rapidly changing, as the new entrants are attempting to
maximize their share of Indian Market.
Your Company has acquired New Customers and developed new applications
for its products during the year under review and will continue to
design appropriate market strategies.
Effective from 1 April 2011, the emission norms applicable for
Commercial Equipment Vehicles [CEV] have changed from BS-II to BS-III.
If the component industry is unable to ramp up its supplies
commensurate with demand, Company may lose market opportunities in the
short term.
Auto Majors will continue to aggressively book the plant capacity of
Suppliers. As such, Company will proactively work towards enhancing
Supplier capacities and capabilities.
PROSPECTS FOR THE CURRENT YEAR
For the current financial year 2011-12, your Company has a cautious
outlook on the economy, considering the anticipated rise in crude oil
prices, inflationary pressures in the economy and the rising interest
rates.
Government of India continues to put great emphasis on infrastructure
especially the urban infrastructure as well as national highways, by
enhancing budgetary allocation as well as setting up of lending
mechanism.
Several necessary steps to meet the requirements of regulatory change
from BS II to BS III emission norms in the off highway sector have been
taken.
In the Power Generation segment, the demand and supply gap for power
and improvement in lifestyle will continue to drive the business. The
power deficit will continue to drive the demand. The deficit is
expected to be around 10% during the current financial year. This
deficit, along with the growth in service and manufacturing sector is
expected to trigger growth for generating sets business during the
current financial year. Besides conventional power generation,
Government of India has announced setting up of new Nuclear Power
Plants. Your Company has already taken lead by successfully supplying
large Gensets to Kalpakkam Nuclear Power Plant. Sale of newly
introduced DV range of generating sets has picked up and is expected to
do better. With the projected 8-9% GDP growth, the Company expects to
achieve growth of turnover in the range of 15% to 20%.
CAUTIONARY STATEMENT
Statements in this Report, particularly those which relate to
Management Discussion and Analysis, describing the Companys
objectives, projections, estimates and expectations may constitute
"forward looking statements" within the meaning of applicable laws and
regulations. Actual results might differ materially from those either
expressed or implied.
INTERNAL CONTROLS SYSTEMS AND THEIR ADEQUACY
Internal Audit across the organization is carried out by a renowned
auditing firm as per the plan approved by the Audit Committee. Senior
Management of the Company reviews the internal audit reports regularly
and the major findings of the audit report along with the action plan
are discussed with the Audit Committee. Internal Controls related to
key business processes are validated during the course of audit. During
the year, ERP implementation review in respect of various business
processes was also carried out.
LISTING FEES
The annual listing fees for the year under review have been paid to
Bombay Stock Exchange Limited, Mumbai and National Stock Exchange of
India Limited, Mumbai where your Companys shares are listed.
DIRECTORS
Pratap G. Pawar, Dr. Naushad D. Forbes, Anil A. Alawani and Nihal G.
Kulkarni retire by rotation at the ensuing Annual General Meeting and
being eligible, offer themselves for re-appointment.
Pursuant to Section 260 of the Companies Act, 1956, read with Article
160 of the Articles of Association of the Company, the Board of
Directors, in its meeting held on 11 March 2011, co-opted Dattatraya R.
Swar as an Additional Director on the Board of the Company. He holds
office of Director up to date of ensuing the Annual General Meeting of
the Company. He is eligible for appointment.
The Board of Directors has re-appointed Rahul C. Kirloskar as the
Whole-time Director of the Company on 13 May 2011, for a period of 5
years with effect from 5 June 2011. A proposal for his appointment as
the Whole-time Director and remuneration payable to him is being placed
before the Members of the Company for their approval at the Annual
General Meeting.
The brief resumes and other details relating to the Directors who are
proposed to be appointed/re-appointed, as required to be disclosed
under Clause 49 of the Listing Agreement, form part of the Report on
Corporate Governance.
DIRECTORS RESPONSIBILITY STATEMENT
Pursuant to Section 217(2AA) of the Companies Act, 1956 the Board of
Directors state:
- That in the preparation of the annual accounts, the applicable
accounting standards have been followed along with the proper
explanation relating to material departures;
- That the Directors have 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 of
the Company for that period;
- That the Directors have taken proper and sufficient care 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
- That the Directors have prepared the annual accounts on a going
concern basis.
CORPORATE GOVERNANCE
A report of the Corporate Governance, along with the certificate of
compliance from the Auditors, forms part of this report.
AUDITORS
The Statutory Audit of the accounts of the Company is currently carried
out by M/s. Dalal & Shah, Chartered Accounts, Mumbai (Firm Registration
No. 102021W).
You are requested to appoint M/s. P. G. Bhagwat, Chartered Accountants,
Pune (Firm Registration Number 101118W) in respect of whom the Company
has received a Special Notice pursuant to Section 190 and 225 of the
Companies Act, 1956, to hold office as such from the conclusion of this
Annual General Meeting until the conclusion of the next Annual General
Meeting.
The requisite certificate pursuant to Section 224 (1-B) of the
Companies Act, 1956 has been received from M/s. P. G. Bhagwat,
Chartered Accountants, Pune.
STATUTORY DISCLOSURES
The information relating to conservation of energy, technology
absorption and foreign exchange earnings and outgo as required under
section 217(1)(e) of the Companies Act, 1956 read with the rules there
under is given in Annexure A forming part of this report.
As required under section 217 (2A) of the Companies Act, 1956, read
with the Companies (Particulars of Employees) Rules, 1975, a statement
giving the required information relating to the employees covered there
under is given in Annexure to this report. As per the provisions of
section 219(1) (b) (IV) of the said Act, these particulars will be made
available to any shareholders on request.
ACKNOWLEDGEMENTS
Your Directors would like to place on record their appreciation of the
contribution made and support provided to the company by the
shareholders, employees, bankers, suppliers and customers during the
period under report.
For and on behalf of the Board of Directors
ATUL C. KIRLOSKAR
Chairman and Managing Director
Date : 13 May 2011
Place : Pune
Mar 31, 2010
The Directors have the privilege of presenting the First Annual Report
of your Company for the period ended on 31 March 2010.
IMPLEMENTATION OF SCHEME OF ARRANGEMENT
A. TRANSFER OF DEMERGED UNDERTAKING
During the year under review, the Honble High Court of Judicature at
Bombay approved the Scheme of Arrangement between the Company and
Kirloskar Oil Engines Limited (now known as Kirloskar Industries
Limited (KIL) with effect from 31 March 2010) vide its order dated 31
July 2009 read with its order dated 19 March 2010 (the "Scheme"). The
Appointed Date of the Scheme of Arrangement is 1 April 2009. The
Balance Sheet and Profit and Loss Account and related financial
statements have accordingly been made, as per the provisions of the
said Scheme.
In terms of the Scheme, the Engines and Auto-components business of KIL
was transferred to the Company with effect from 31 March 2010, and
vested in Company with effect from the Appointed Date, i.e. 1 April
2009. KIL carried on the business in trust on behalf of the Company for
the period from 1 April 2009 to 31 March 2010. The first financial year
of the Company is from 12 January 2009 (date of incorporation) to 31
March 2010.
B. NAME CHANGE OF THE COMPANY
As per clause 18 of the Scheme, upon the Scheme becoming effective, the
Resulting Company shall be renamed as Kirloskar Oil Engines Limited.
Accordingly, the Company has applied to the Registrar of Companies,
Pune, for change in name of the Company. The said application is
pending before the competent authorities.
C. ALLOTMENTOFSHARES
Pursuant to the Scheme, the Committee of the Board of Directors of the
Company on 30 April 2010, issued and allotted 14,56,29,750 fully
paid-up equity shares of Rs. 21- each to those shareholders of
Kirloskar Industries Limited (KIL) whose names appear in the Register
of Members as on the Record Date i.e. 22 April 2010, in the ratio of
three (3) equity shares of Rs. 2/-each for every four (4) equity shares
held in KIL.
D. LISTING ON STOCK EXCHANGES
After the allotment of shares, the Company has initiated the process of
making an application for listing of the new shares, on the Bombay
Stock Exchange Limited (BSE) and National Stock Exchange of India Ltd.
(NSE).
FINANCIAL PERFORMANCE:
(Rupees in 000s)
2009-2010
Total Income 22,691,722
Total Expenditure 20,057,176
Profit before exceptional items & taxation 2,634,546
Profit before taxation 2,634,546
Provision fortax (including Deferred Tax) 994,419
Net Profit 1,640,127
Surplus (After other adjustments) 1,640,127
Appropriations
Your Directors propose to appropriate the available surplus as follows:
(Rupees in 000s)
Proposed Dividend 582,519
Interim Dividend NIL
Corporate Tax on dividend 96,749
Transferto General Reserve 164,013
Balance carried to Balance Sheet 796,846
Dividend:
The Directors recommend a dividend of 200 % (Rs. 4 per share) for the
year.
MANAGEMENT DISCUSSION & ANALYSIS:
The operations of Company comprise of Engines and Bearings business.
This business segmentation forms the basis for review of operational
performance.
The growth rate stated in this report relating to the operations of the
Company is with reference to the same business that was carried on by
KIL in the previous year.
Industry Overview
During the financial year 2009-10, the Indian Economy experienced a
cautious and yet a firm revival across its three sectors i.e.
Agriculture, Industry & Services.
The fiscal stimulus packages announced by Government of India played a
critical role in getting the Indian Economy back on its track. Besides
creating a positive impact on several other stakeholders, the stimulus
packages helped in boosting the investor confidence.
In the revival process, Services Sector revived first, followed by
Industry and Agriculture. You would recall that during the first
quarter of the year under review, market players were extremely
cautious. The turnaround started happening during the second quarter
when both sectors i.e. Services & Industry experienced a robust growth,
resulting in overall economic growth of 7.9% during second quarter.
This is despite slight drop in agriculture output (-0.2%) due to sub
normal monsoons. Due to withdrawal of fiscal stimulus package in the
Fiscal Budget for 2010-11, there was a slight decline in Industrial
production during March 2010, (from 15.1% during Feb 2010 it dropped to
13.5% for March 2010).
During the year under review, Agricultural Sector declined by 0.2%, the
Industrial Sector grew by 10.4% from a low of 2.8% during the previous
fiscal, while the Services Sector grew by 8.7%. As a result, during the
year under review, Indian Economy experienced a robust growth of approx
7.2% at 2004-05 factor prices.
Company Performance:
During the year under review Company achieved sales of Rs. 2,219
crores.
The profit before tax is at Rs. 263 crores after providing for
depreciation of Rs. 84 crores.
Business wise analysis is presented below.
BUSINESS WISE OPERATIONAL PERFORMANCE
The Company caters to the needs of Customers spread over all the three
sectors of the Economy i.e. Agriculture, Industry & Services.
A. ENGINE BUSINESS
1. Agriculture & Off Highway Engines Business
During the year under review, the Company succeeded in enhancing its
market share in the Agri segment from 8% to 17%. This has been possible
due to several proactive measures implemented during the year under
review e.g. pruning down the product basket, improving product
availability in the market place, restructuring of supply channel and
aggressive launch of new product viz.; Varsha Pumpset. During the first
year of its commercial launch, Company could successfully sell over
30,000 Varsha Pumpsets in a competitive Portable Pumpset Segment.
As we entered the year under review, Major Players in the Off Highway
Segment continued to remain anxious about the ensuing demand. However,
unlike the other major economies, the Indian economy recovered quickly
and firmly; largely driven by the domestic demand and Company geared up
to fulfill the rising demand. The proactive measures adopted by Company
resulted in strengthening of its market share to 54% from 52% in the
domestic market.
Overseas Agri & Off Highway Market did not experience revival of
demand. During the year under review Company evolved a strategy to map
the potential of focus markets, position people close to the market,
besides creating regional service set-ups. During the ensuing year
these initiatives will help us to comprehensively address the demand in
the focus market and will also enable the Company and OEM Customers
using Companys engines to tap the potential business in the focus
markets.
2. Power Generation Engines Business:
The financial year 2009-10 saw revival of the domestic Power Generation
Market, except Telecom Segment. Overall market grew by 10%. The
Telecom Segment has stagnated, as the Tele-density has peaked in Urban
India and Telecom Companies continue to share the Infrastructure.
During the year, the Company has launched DV series engines with
in-house 4 Valve High Pressure Central Injection (HPCI) technology. The
engines are fuel efficient and environment friendly. In addition to DV
series, the company has also launched Gas Gen-sets in the range of
15-140 KVA.
The Global economic meltdown continued in the Overseas Markets served
by the Company, leading to lower export growth. However, during the
second half of the financial year; beginning Oct-09, Company
experienced cautious revival in some part of Mid-east Market.
The Company has worked out plans to selectively target the Overseas
Markets of Africa & Mid-east, through creation of Sales & Distribution
Channels. Company has also moved people to actively support the Channel
Partners at key geographical locations in countries such as UAE,
Nigeria, South Africa & Kenya. Successful user trial of the Companys
products for telecom segment is paving the way for developing business
with Telecom Customers in the overseas markets.
3. Customer Support Business:
After-market, Market network of the Company continues to expand every
year; with twin objectives viz.; to remain close to the customer and to
provide proactive service. The network now encompasses 95 Service
Dealers and 290 Service outlets to support Customers in Off Highway &
Power Generation Markets.
During the year under review spare parts sell of the Company grew by
20%.
4. Large Engines Business:
During the year under review, the Company manufactured and supplied 8
marine engines, for propelling Indian Naval ships.
The Company, also successfully executed the first order for supply of
four Gensets each rated to 3.6 MW, for the Nuclear Power Plant at
Kalpakkam. These Gensets successfully passed several stringent Product
Quality Tests.
5. Kagal Plant:
On 5th March 2010 Kagal Plant was formally inaugurated at the hands of
honorable Chief Minister of Maharashtra Shri. Ashokraoji Chavan.
During the year under review, Kagal Engine Plant produced 49,263
engines, up by 58%. Kagal Genset Plant produced 7,663 Genset, up by
70%.
Company progressively established the facility to assemble and test
over 100,000 Varsha Pumpsets annually.
During the year under review, Company successfully piloted 96 engine
models and 12 engine components to fulfill the needs of discerning
Customers in Off Highway and Power Generation businesses.
6. Khadki Plant:
As an integral part of range extension in Power Generation as well as
Off Highway Markets, Company has developed a new engine family named
DV. The DV engine family will extend the current Genset Range up to 600
kVA. It will also enable the Company to address the needs of Customers
in Off Highway Markets on equipments such as Water-well Rigs,
Locomotives, Fire Pumps, Motor Graders, Dumpers in the 355-hp to 600-hp
range.
As a result Company decided to establish a modern manufacturing
facility at Khadki Plant. The DV Plant deploys several lean
manufacturing concepts.
7. Rajkot Plant:
During the year under review, Rajkot Plant expanded its supplier and
assembly capacity by over 60%.
The Company also successfully launched new range of Pumpsets for the
Agri market and sold over 5,000 Pumpsets during the year under review.
B. Bearings Business:
The financial year 2009-10 witnessed end of recessionary period for
Indian Automobile Industry. As the year progressed it experienced
robust growth cutting across segments in the domestic demand for
automobiles. This resulted in a healthy order board throughout the
year, for Company.
During the year, Companys market share in the OEM as well as
After-market Segments has increased from 37% to 41%.
The Company undertook various initiatives to develop material
technologies capable of addressing emerging needs of automobile
manufacturers.
C. Research and Engineering:
Company strives to fill the product gaps by developing new products and
extending existing products.
i. New Products and Product Developments:
During the year under review, Company has successfully developed a
smaller foot-print product K1080 series engine for filling the product
gap from 125kVAto 160kVA.
Two models of DV8 and DV12 from DV series are under productionization
to cover product ranges from 320 to 625 kVA.
Company is developing new variants of Varsha Pumpset to meet higher
head requirement of specific region which have lower ground water
levels. These variants will make Varsha Pumpset a pan India Product.
During the year under review, the Company has developed CNG, Natural
Gas Genset up to 160kVA.
In Off Highway Market, Company successfully developed and supplied over
50 Prototype Engines for several equipments to support the New Customer
Acquisition Plan.
ii. Technology:
The emission upgrade of Off Highway engines to fulfill the ensuing 2011
BS-III emission norms has progressed as planned.
Company has successfully developed engines running on bio-fuels like
bio-gas and straight vegetable oils (SVO).
Company is committed to adopt Green Technology and make prudent
investments in such technologies on a continual basis.
D. Industrial Relations:
The Company continued to maintain and improve its healthy and
harmonious industrial relations. The Union at Khadki plant has recently
reconstituted its Apex, Industrial Relations and Grievance Handling
Committees.
For the sixth consecutive time, the Union and Company have executed the
wage agreement at Khadki plant, on 31 March 2010, prior to the expiry
of the previous agreement.
Employees health is of prime importance to Company. Medical checkup of
employees is carried out regularly. Company regularly conducts
lectures on health, fitness, common ailments and deceases and life
style improvement with a view to enhance employee awareness.
Development of employees is an important focus area for the Company.
Employees are encouraged to participate in programmes such as, out-
bound training, team building, and also various participative
activities within and outside the Company.
A well maintained sports ground is provided and employees avail this
facilities after working hours. Yoga classes are conducted for the
employees thrice a week.
E. Environment, Energy Conservation, Employee Health & Safety:
Environment
During the year under review, Kagal Plant brought 25,000 sq. mtrs.
under Green Initiative by planting over 2,000 trees.
Khadki plant is certified under EMS, IS014001:2004 (Environmental
Management System), and OHSAS 18001:2007 Use of alternate fuel, SVO
(Straight Vegetable Oil) in lieu of high speed diesel.
Conducted feasibility study for using environment friendly alternative
fuel (Bio-LDO) in HT Furnaces.
Energy Conservation & Process Enhancements
Company undertook energy conservation drive by improving power factor,
engine testing with regenerative load bank etc, at its Kagal Plant,
which resulted in total energy saving of 10% by value at the plant.
EHS Improvements:
During the year under review, Company implemented the following Health
& Safety improvement measures:
* Asbestos roof replacement program initiated at Khadki, Nashik and
Ahmednagar plants.
* Electrical Safety Audits through National Safety Council (NSC) at
Khadki, Kagal, Nasik & Rajkot plants.
* Kagal Plant also introduced in-house Medical Center and Ambulance
facility for regular health checkups and to meet any emergency
situation.
* To increase Environmental, Occupational Health & Safety awareness of
employees, different competitions were conducted on Energy Conservation
(ENCON), Occupational Health & Safety at ail locations along with
Environment Day celebration.
Certification and Awards
During the year under review, Company secured certifications such as
ISO 9001 : 2008 (during May 2009) and EMS 14000 & OHSAS18001 (during
December 2009).
Company secured certification under EMS, ISO 14001:2004 &
OHSAS-18001:2007 for its Large Engines Plant at Nasik.
Implementation of EMS & OHSAS is in process at Ahmednagar & Rajkot
Plants.
F. Human Resources
During the year under review, Company undertook further structural
changes in the Power Generation Business Group, to bring target markets
under sharp focus. On similar lines, roles in Manufacturing Area were
realigned to enhance operational efficiency. And Projects and
Manufacturing Engineering functions were made Corporate Functions to
serve as a common resource for all Manufacturing Plants.
Company reframed Managerial Performance Management System and
implemented the same across the Organisation. With a view to develop
future Leadership Pool, the Company has tied up with a leading
Management Institute and organised Leadership Development Programme for
a batch of senior managers, who were awarded post graduate diploma
certificate by the Institute. Besides this, a batch of middle level
managers underwent a modular Middle Management Training Programme with
Kirloskar Institute of Advanced Management Studies.
Company tied up with Gallup India and conducted Employee Engagement
Survey. Results of this survey were shared with all managers and
specific activities were undertaken to enhance employee engagement
levels.
The total number of employees of the company as on 31 March 2010 is
3,488.
G. Corporate Social Responsibility:
"The Company is a Responsible Corporate Citizen contributing to the
well-being of the society."
The Company undertakes various societal initiatives with a sense of
responsibility. It also inculcates this value in its employees by
giving them opportunities to participate in these activities.
The Companys Social activities are organized across all its
manufacturing locations, viz. Pune (Khadki), Ahmednagar, Nasik, Kagal
and Rajkot in the areas of Education, Health, Environment and
Livelihood Generation.
* Sponsored education of children from Akanksha Foundation.
* Career Guidance Workshop, for students of the nearby communities.
* Organized awareness program for women on the topics like HIV,
Adolescent stage, Diet and Nutrition.
* Environment Awareness Program for women, children and youth
population.
* Promoting ENCON activities by conducting Essay, Slogan and Poster
competitions for school students.
* Organized income generation workshop for community population on
preparation of paper bags, Entrepreneurship development, Management and
Marketing.
* Livelihood Advanced Business School (LABS) training program was
organized for youths in the age group of 18 to 25 years, on subjects
like IT, personality development and spoken English.
H. Cost Control:
During the year under review, cost control and cost reduction
activities continued to be the thrust area for Company. Effective
monitoring of cost across the Demand & Supply Chain enabled Company
seek better margins.
I. Quality Assurance:
Company has strengthened several key processes, with a view to enhance
process effectiveness as well as predictability measures. Proto Engine
Planning, Manufacturing & Supply Process is one such example. Customers
accepted almost 100% of the Prototype engines "Right First Time
Protos".
Company undertook several initiatives such as 6 Sigma, 4S, Quality
Circle and Mr. Customer to improve Zero-hour Availability. Kagal Plant
now has 6 certified Black Belts and over 27 Green Belts are undergoing
training.
Company improved several key processes at its Kagal plant to enhance
Product Quality as well as Availability.
J. Business Excellence:
The Company for the first time participated in CI IEXIM Bank Award for
Business Excellence 2009 and has received the "Commendation Certificate
for Strong Commitment to Excel".
CONCERNS & THREATS
The current year holds a lot of hope and confidence for the Indian
Industry. Though Government of India has announced gradual withdrawal
of the stimulus package. Monetary measures to control inflation and
soak up excess liquidity generated through stimulus packages are also
likely to put pressure on the interest rate scenario thereby increasing
the cost of capital. The recent Euro zone crisis may further slow down
the recovery of Global Economy. The Company will continue to closely
monitor the developments in the Indian and Global economy and strive to
protect and enhance value for its stakeholders through appropriate
business initiatives and responses.
The inflationary trend is likely to soften during the second quarter of
the current fiscal and demand is likely to pick up again during the
festive season in the third quarter. However, if the inflationary trend
does not soften as expected, it is likely to adversely affect the
demand.
Several Global Players in the Automotive, Power Generation as well as
Off Highway markets are in the process of setting up their operations
in India. Thus the competitive landscape in the Equipment Market is
poised for a change, since the new entrants will attempt to maximise
their share of Indian Market. Company has acquired New Customers and
developed new applications for its products during the year under
review and will continue to design appropriate market strategies to
address the competitive landscape in India.
Auto Majors are aggressively booking the plant capacity of Suppliers
which can create pressure on Company to obtain quality components.
Keeping in view the above scenario, Major Players may explore
consolidation of their businesses. Though it is difficult to assess the
impact of such consolidation now, Company will continue to watch such
market movements and prepare an appropriate response.
PROSPECTS FOR THE CURRENTYEAR
Unlike several economies of the developed as well as developing world,
the Indian Economy got back on its feet, rather quickly, thus
demonstrating its intrinsic strengths, largely driven by domestic
demand.
During the current financial year 2010-11, Company anticipates overall
economic growth of around 8% to 9%; the Services Sector of economy will
be the major driver. However in the near term, the economy is most
likely to heat up due to spiraling inflation which is likely to soften
the demand during the second quarter, before picking up again during
the festive third quarter.
Government of India has laid heavy emphasis on Infrastructure
especially the Urban Infrastructure as well as National Highways by
enhancing budgetary allocation as well as setting up lending mechanism
through IIFCL. In Agriculture sector, Government has stepped up credit
flow to farmers by over Rs. 50,000 Crores.
In the Power Generation segment, Power Deficit will continue to drive
the demand. Company does not expect the deficit to go below 10% during
the current financial year. Besides this, Company expects two other
drivers to come into play viz.; changing life style of Target Customers
and increasing per capita power consumption which is expected to rise
by 30% to 1,000 units of energy. Besides conventional Power Generation,
Government of India has announced setting up of new Nuclear Power
Plants. Company has already taken lead by successfully supplying large
Gensets to Kalpakkam Nuclear Power Plant.
The rapid growth is likely to continue in the automotive segment during
the current financial year.
Keeping in view the overall positive business environment, Company
plans to grow by 20% in value terms during the current financial year.
CAUTIONARY STATEMENT
Statements in this Report, particularly those which relate to
Management Discussion and Analysis, describing the Companys
objectives, projections, estimates and expectations may constitute
"forward looking statements" within the meaning of applicable laws and
regulations. Actual results might differ materially from those either
expressed or implied.
INTERNAL CONTROL SYSTEMS & THEIR ADEQUACY
Renowned auditing firm conducts the Internal Audits of all the business
units of the Company. The internal audit program is designed to ensure
extensive review of the business operations of the Company and is not
restricted only to a review of finance and accounting functions. The
internal auditors also check, validate and report on the internal
controls in place in the areas covered during the audit.
DIRECTORS
Mr. Atul C. Kirloskar, Mr. Gautam A. Kulkarni and R.R. Deshpande were
the first directors of the Company. They will be appointed as directors
of the Company at the ensuing Annual General Meeting.
Pursuant to Section 260 of the Companies Act, 1956, read with Article
160 of the Articles of Association of the Company, the Board of
Directors, in its meeting held on 30 March 2010, co-opted Mr.
R.Srininvasan, Mr. U.V Rao, Mr. H M Kothari, Mr. Nihal Kulkarni, Mr.
Rahul C. Kirloskar, Mr. M Lakshminarayan, Mr. PG. Pawar, Dr. Naushad
Forbes and Mr. A.N. Alawani as Additional Directors on the Board of the
Company. They hold office of Director up to date of the ensuing Annual
General Meeting of the Company and being eligible, offer themselves for
appointment.
Mr. Atul C. Kirloskar was appointed as Managing Director of the Company
by the Board in its meeting held on 30 March 2010, with effect from 31
March 2010 for a period of 5 years.
Pursuant to the Scheme of Arrangement between Kirloskar Oil Engines
Limited (Demerged Company - now known as Kriloskar Industries Limited)
and Kirloskar Engines India Limited (Resulting Company) the services of
Mr. Gautam A. Kulkarni as Joint Managing Director, Mr. Rahul Kirloskar
as Whole Time Director and Mr. R.R. Deshpande as Executive Director of
the Company, for a period upto 19 August 2013,4 June 2011 and 28 April
2010, respectively, with effect from 31 March 2010 have been
transferred from Demerged Company to Resulting Company.
The services of Mr. R.R. Deshpande have been transferred on a
continuous basis from the Demerged Company to the Company, with effect
from 31 March 2010 for the balance period of his term, i.e. up to 28
April 2010, pursuant to the Scheme of Arrangement. Mr. R.R. Deshpande
was re-appointed as the Executive Director for a further period of five
years with effect from 29 April 2010.
The brief resumes and other details relating to the Directors who are
proposed to be appointed/re-appointed, as required to be disclosed
under Clause 49 of the Listing Agreement, form part of the Report on
Corporate Governance.
DIRECTORS RESPONSIBILITY STATEMENT
Pursuant to Section 217(2AA) of the Companies Act, 1956, the Board of
Directors state:
* That in the preparation of the annual accounts, the applicable
accounting standards have been followed along with the proper
explanation relating to material departures;
* That the Directors have 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 of
the Company for that period;
* That the Directors have taken proper and sufficient care 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
* That the Directors have prepared the annual accounts on a going
concern basis.
CORPORATE GOVERNANCE
A report of the Corporate Governance, along with the certificate of
compliance from the Auditors, forms part of this report.
AUDITORS
You are requested to appoint Auditors for the current year. The
retiring auditors M/s Dalai & Shah, Chartered Accountants, (Firm
Registration No. 102021W) are eligible for re-appointment.
STATUTORY DISCLOSURES
The information relating to conservation of energy, technology
absorption and foreign exchange earnings and outgo as required under
section 217(1 )(e) of the Companies Act, 1956 read with the rules there
under is given in Annexure A forming part of this report.
As required under section 217 (2A) of the Companies Act, 1956, read
with the Companies (Particulars of Employees) Rules, 1975, a statement
giving the required information relating to the employees covered there
under is given in the Annexure to this Report. As per the provisions of
section 219(1 )(b)(iv) of the said Act, these particulars will be made
available to any shareholder on request.
ACKNOWLEDGMENTS
Your Directors would like to place on record their appreciation of the
contribution made and support provided to the Company by the
shareholders, employees, bankers, suppliers and customers during the
period under report.
For and on behalf of the Board of Directors
ATUL C.KIRLOSKAR
Chairman and Managing Director
Date: 14 May 2010
Place: Pune
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