KIRLOSKAR BROTHERS LIMITED
ANNUAL REPORT 2007-2008
The performance of the company in the last year was not in line with our
Our growth in sales at 14% was lower than the growth rate of the previous 3
years. There was a lack of progress on many projects in various states.
Despite the addition of a distribution network which led to higher sales of
Industrial and Engineered pumps, we could not increase our total
international sales. This, in turn reduced the profitability of the
company. While, there has been a tremendous rise in raw material prices,
various initiatives have been undertaken to reduce its effect. Other
measures have been taken to improve our margins. Our order board as on
April 1, 2008 stands at over Rs. 40 billion.
While the year has not been upto expectations, the scope for growth in
both, water and power infrastructure is immense. The Central Government and
various State Governments have committed to large programs to improve water
supply facilities for urban as well as rural areas for drinking as well as
irrigation purposes. Water and sewage treatment facilities also have to be
developed. Similarly, the demand for power is set to grow. You would be
happy to know that our company has completed the installation of one of the
world's largest Hydro Pneumatic systems for a 2800 apartment complex in
India. It has also received prestigious orders from the Public Utility
Board, Singapore as well as Rand Water in South Africa for large pumps for
water supply and water treatment. We have also received repeated orders
from Bechtel International and Alstom Power for our circulating water pumps
for power stations in the United States and United Kingdom, respectively.
These references which signify international acceptance of our products and
services by global majors will raise the company's profile in
Our Focus Africa program continues. At the India Africa Summit held in
April in New Delhi, the Government of India has committed US $5 billion for
Africa and the main area identified for cooperation is Food Security. You
would be happy to know that our supply of pumpsets to Senegal is beginning
to make a difference in that country. We have supplied approximately 2400
pumpsets ranging from 5 KW to 90 KW. About 65% of these pumps had been
distributed to farmers by the Government by the year end, and many of them
have been pumping water to the existing farms. About 15000 additional
hectares of land has been brought under cultivation as a result. The
installed pumps are now in operation for the last 3 to 4 months and it is
expected that another 100,000 tons of rice will be available for
consumption. Once the entire batch of 2400 pumps is operational and working
full time, another 60,000 hectares of land will be brought under
cultivation. In times to come, 2 to 3 crops per year is a definite
possibility. Working with us, the Government of Senegal plans to provide
sufficient irrigation facilities to make Senegal self sufficient in rice
production in the next 4 to 5 years.
The Indian pump industry has started feeling the heat of globalization as
all the top ten global players are in the process of firming up their
presence and expanding their operations on Indian soil. As the largest
Indian pump company, we have global competition for every product in each
segment that we operate in. I am sure that such competition would benefit
our customers and make us a better company as well. In October, 2006, we
had taken over the construction business of the reputed Aban group. The
company now renamed 'Kirloskar Constructions and Engineers Limited', has
achieved sales of Rs. 961 million last year. We expect the company to come
into profit in the near future. KBL continues to move from being a product
company to being a total solution provider. We completed our acquisition of
Gondwana Engineers Limited, a Nagpur based company engaged in the supply of
water treatment and sewage treatment plants.
Our company's requirement of steel castings for large pumps and valves has
increased tremendously in recent years. It was therefore thought prudent to
take over the management of The Kolhapur Steel Limited (TKSL), a company
engaged in the business of manufacturing of alloy steel castings catering
to sugar, cement, steel, pumps, valves, marine, earth moving and other
general engineering industries sectors.
The Honourable Board for Industrial and Financial Reconstruction (BIFR) has
recently approved the modified rehabilitation scheme of TKSL and the
Company would acquire about 81% of equity share capital of TKSL.
The captive demands of the company for quality steel castings would be
catered by TKSL.
SPP Pumps Limited, our subsidiary company in the United Kingdom has done
well in 2007. Turnover rose by 28% to Pound 43.60 million and profits after
tax by 66% to Pound 1.49 million. Many joint development programs for
products and markets between the two companies are progressing well.
As Kirloskar Brothers becomes a larger company, there are many new
opportunities for expansion in business around the globe. In order to have
a proper structure for all overseas investments, we have established
Kirloskar Brothers International B.V. in the Netherlands. We have also
established a joint venture company Kirloskar Brothers Europe B.V. with a
local partner, Industrial Pump Group (IPG). IPG, a sales and service
company, has introduced our large pumps at the plants of many European
customers. We are also looking at setting up operations in Thailand to
service the South East Asian markets.
You are aware of our Company's Vision and Mission. In order to achieve
targets and ensure future scalability, the management has re-structured its
entire business operations and a sectoral approach has been introduced.
This is to enable both product and project leadership, customer intimacy
and operational excellence. An overview of the operating performance of
business units has been taken in the Management Discussion and Analysis.
More thrust has also been given on research and developmental activities to
explore innovative ideas in fluid machines and system engineering and
applications. This would help the company to improve product quality and
its working efficiency further.
The wholehearted efforts of our team were recognized and acknowledged
through many awards last year. Some of the awards received were the
National Award for 'Excellence in Energy Management 2007' by Confederation
of India Industry (CII) and 'The Innovation for India Awards 2008'
organised by Marico Foundation, for innovation approach in Siphon Action,
'ENERTIA Award 2007', the first ever national award for sustainable
development and 'The Golden Peacock Award' for innovative product.
I am glad to inform you that the Company is constructing its own corporate
office building at Baner, in the outskirts of Pune. This office building
will aspire to achieve LEED (Leadership in Energy and Environmental Design)
- Platinum rated Green Building status. As you are aware, the company has
township adjoining the factory in Kirloskarvadi. This township was set up
by our founder Mr. Laxmanrao Kirloskar in 1910. It has grown with the
factory, but lately a need has been felt that it needs to be modernized in
order to attract and retain the best talent. We are therefore investing in
new residential and social facilities to ensure that it remains an
attractive and modern place to live in.
Business expansion and profitable growth is possible only with effective
support of all my colleagues. I would like to thank our Board members for
their consistent support and guidance to help management achieve the
Company's vision. I also appreciate the efforts of all our employees for
building the strength of the Company.
In order to communicate business developments to shareholders from time to
time, we have forwarded the half yearly results of the company to you in
October, 2007. We wish to continue the practice in future.
Continuous efforts are being taken on all fronts to enhance the business of
the company and presence through out the world. I look forward to
continuing this journey to meet challenges in the years to come.
Chairman & Managing Director