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Kirloskar Pneumatic Company Ltd.

BSE: 505283 Sector: Engineering
NSE: KGKHOSLA ISIN Code: INE811A01012
BSE LIVE 19:40 | 19 Oct 901.10 9.75
(1.09%)
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NSE 05:30 | 01 Jan Stock Is Not Traded.
OPEN 881.00
PREVIOUS CLOSE 891.35
VOLUME 176
52-Week high 1389.90
52-Week low 681.00
P/E 53.93
Mkt Cap.(Rs cr) 1,789
Buy Price 0.00
Buy Qty 0.00
Sell Price 900.00
Sell Qty 9.00
OPEN 881.00
CLOSE 891.35
VOLUME 176
52-Week high 1389.90
52-Week low 681.00
P/E 53.93
Mkt Cap.(Rs cr) 1,789
Buy Price 0.00
Buy Qty 0.00
Sell Price 900.00
Sell Qty 9.00

Kirloskar Pneumatic Company Ltd. (KGKHOSLA) - Director Report

Company director report

DIRECTORS

TO

THE MEMBERS

The Directors have pleasure in presenting their Report along with the Audited Accountsfor the year ended March 31 2014.

FINANCIAL RESULTS:

The Financial results for the year ended March 31 2014 are summarised below:

(Figures in Rs)
2013-14 2012-13
Gross Profit 746791697 822662567
Less:
Depreciation 132140425 114903957
Provision for Taxation 226350955 236782304
Profit after tax 388300317 470976306
Surplus from previous year 207781268 217131761
Add/(Less)
Transferred to General Reserve 250000000 300000000
Proposed Dividend 128443380 154132056
Tax on Proposed Dividend 21828952 26194743
Retained Earnings 195809253 207781268

OPERATIONS

The Indian economic growth rate has slowed down for the past couple of years andrecovery is still some time away. The complex world of global economics and its volatilityhave affected India's growth also.

The manufacturing sector has been the worst affected and the capital goods market hasbeen hit the hardest. High fiscal deficit high inflation a volatile currency and thepolitical environment have all contributed to uncertainty in the economy which in turn hascaused the Company's revenue to drop for the year 2013-14.

The net revenue of your company for the year ended under review was Rs. 5099 Millionagainst Rs. 5488 Million of last year. The revenue of the compression segment was Rs.4159 Million as against Rs. 4484 Million in 2012-13.

The compression segment was affected mainly due to very low investments in the Oil andGas sector. Capital expenditure for expansion/up-gradation of refineries was also very lowand this affected our business of Refrigeration and Gas Compression Systems. The CNGbusiness was affected due to various infrastructural and gas availability issues. Ourthrust into the export business has resulted in your Company booking the first exportorder for a CNG system.

The revenue of the Transmission segment was Rs. 679 Million as against Rs. 1005Million in 2012-13. The Transmission segment was affected mainly due to stagnation ofgrowth and high stock levels in the Indian Railways. The wind turbine market also wentdown substantially due to lackof clarity in Government policies.

During the year under review your company has successfully completed the EmergencyBrake Distance Test (EBD) of one RoadRailer Rake which is a pre-requisite for the runningof this train. Your Company is now awaiting the final certification from the concernedRailway authorities.

Cost reduction measures and the WoW (war on waste) initiative helped your company togenerally maintain its profitability for the year under review despite a severe downturnin the economy.

ENERGY CONSERVATION

Within the Company there are continuous efforts to improve operational efficiencies andminimizing consumption of natural resources. Your Company actively makes efforts toincrease awareness about the need to sustain the environment and constantly evaluates newinitiatives that could reduce waste and emissions within the Company.

As a result of this even though there is a substantial rise in power tariff and oilprices we have been able to contain our costs.

DIVIDEND

The Board of Directors have recommended a dividend of Rs.10/- (100 %) per equity sharefor the year ended March 31 2014. In the last year a dividend of Rs. 12/- (120%) perequity share was paid.

FIXED DEPOSIT

As of March 31 2014 there are no Fixed Deposits outstanding nor unclaimed.

PROSPECTS

Your Company believes that the economic potential of the country may remain subdued forthis year too. With the new Government in place it is hoped that the year 2015-16 will seea boost in investments in sectors that your Company is involved in. The uncertainpolitical climate has led to many projects in the Oil and Gas sector being postponed ordropped. This has impacted the revenue of the Compression segment in 2013-14. It isexpected that some of these projects in the Oil and Gas sector will be cleared forimplementation in 2014-15 which will help your Companies' revenue from 2015-16 onwards.Our drive for exports of hydro carbon based refrigeration systems and gas compressionsystems has resulted in your Company receiving some export orders and we expect to takethis initiative forward in this year too. With the Government of India reintroducinggeneration based incentive and launching of a new initiative to double the production ofrenewable energy by 2017 (upto 55000 MW) opportunities in the Transmission divisionshould grow in the year 2015-16.

After receipt of the EBD certificate from the Railway Authorities and after setting upthe terminals near Delhi and Chennai your Company has a plan to manufacture and sell onemore Road Railer Rake this year.

DIRECTORS

Mr. Sanjay C. Kirloskar resigned from the Board of the Company as on April 23 2014.Your Directors expressed deep sense of gratitude and wishes to place on record theirappreciation of the valuable contribution made by him during his tenure.

As per provisions of the Section 149 and other applicable provisions of the CompaniesAct 2013 your Directors are seeking appointment of Mr. A.C. Mukherji Mr. P.S.Jawadekar Mr. G. Krishna Rao Mr. Sunil Shah Singh and Mr. J.Y. Tekawadeas IndependentDirectors in the ensuing Annual General Meeting. Details of the proposal for appointmentof Mr. A.C. Mukherji Mr. P.S. Jawadekar Mr. G. Krishna Rao Mr. Sunil Shah Singh and Mr.J. Y. Tekawade are mentioned in the Explanatory Statement under Section 102 of theCompanies Act 2013 of the Notice of the 39-Annual General Meeting. The Company hasreceived notice(s) in writing proposing them as candidature for the office of Director.The necessary resolutions for their appointment are being placed before you.

Accordingly Mr. D.R. Swar retires by rotation at the ensuing Annual General Meetingand being eligible offers himself for re-appointment.

CORPORATE GOVERNANCE

Your Company conforms to the norms of Corporate Governance as envisaged in the ListingAgreement with the Bombay Stock Exchange Ltd. A separate report on Corporate Governancealong with Statutory Auditors' Certificate on the Compliance Management Discussions andAnalysis is attached and forms part of the Annual Report.

STATUTORY DISCLOSURES

1. Conservation of Energy Technology Absorption and Foreign Exchange

The information required under Section 217 (1) (e) of the Companies Act 1956 readwith the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules1988 pertaining to Energy Conservation Technology Absorption Foreign Exchange Earningsand Outgo is given in the Annexure I to this Report and forms part of this Report.

2. Particulars of Employees

Information in accordance with sub-section (2A) of Section 217 of the Companies Act1956 read with the Companies (Particulars of Employees) Rules 1975 is given in theAnnexure to the Directors' Report. However as per the provisions of Section 219(1)(b)(iv)of the Companies Act 1956 the Report and the Accounts is being sent to the Members ofyour Company excluding the aforesaid information. Any Member interested in obtaining thesaid annexure may write to the Secretarial Department at the Registered Office of theCompany.

3. Consolidated Financial Statements

Pursuant to Clause 32 and 50 of the Listing Agreement with Stock Exchanges yourCompany has prepared Consolidated Financial Statements as per the Accounting Standardsapplicable to the Consolidated Financial Statements issued by The Institute of CharteredAccountants of India. Audited Consolidated Financial Statements along with the Auditors'report is presented elsewhere in this annual report.

4. Subsidiary Company

Kirloskar RoadRailer Limited is a Subsidiary of the Company. The Subsidiary Company isset up for providing RoadRailer Services. Your Company expects that the RoadRailerservices will commence from the current financial year.

In accordance with the general circular issued by the Ministry of Corporate AffairsGovernment of India the Balance Sheet Profit and Loss Account and other documents ofKirloskar RoadRailer Limited are not being attached with the Balance Sheet of the Company.However the financial information of Kirloskar Road Railer Limited is disclosed in theAnnual Report in compliance with the said circular. The Company will make available theAnnual Accounts of Kirloskar RoadRailer Limited and the related detailed information toany member of the Company who may be interested in obtaining the same.

5. Directors' Responsibility Statement The Directors confirm that:

i. In preparation of Annual Accounts the applicable accounting standards have beenfollowed.

ii. The Directors have selected such accounting policies and applied them consistentlyin order to show true and fair view of the state of affairs.

iii. The Directors have taken proper care in maintaining accounting records as per theprovisions of the Companies Act 1956 for safeguarding your Company's Fixed Assets forpreventing and detecting fraud and other irregularities.

iv. The Annual Accounts are prepared on the principle of going concern.

6. Cash Flow

A Cash Flow statement for the year ended March 31 2014 is attached to the BalanceSheet.

7. Disclosure under the Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013

Pursuant to Section 22 of the Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013 read with Rule 14 of the Rules issued thereunder theInternal Committee constituted under the said Act has confirmed that no complaint/case hasbeen filed/pending with the Company during the year.

AUDITORS

The Auditors of the Company M/s. P.G. Bhagwat Firm Registration No.101118W CharteredAccountants Pune retire at the conclusion of ensuing Annual General Meeting. As per theSection 139 and other applicable provisions of the Companies Act 2013 and the rulesissued thereunder M/s. P.G. Bhagwat Firm Registration No.101118W are eligible forre-appointment for a term of 2 (two) years subject to ratification by the Members at everyAnnual General Meeting. The requisite certificate pursuant to Section 139 (1) of theCompanies Act 2013 has been received by the Company.

EMPLOYEES

Your Company has adopted modern techniques for Human Resource development andretention. Competency mapping identifying training needs career counselling are some ofthe methods adopted by your Company. Training programs are designed to enhance skills andknowledge. Employees are motivated with empowerment and rewards for good performance.Adoption of 5S across the Company has led to a clean and healthy environment. All thesemeasures have resulted in Industry best attrition rate.

Your Company has 970 permanent employees on its roll as on March 31 2014.

ACKNOWLEDGMENT

The Directors wish to convey their appreciation to all your Company's employees fortheir enormous personal efforts as well as their collective contribution to your Company'sperformance. The Directors would also like to thank the shareholders customers dealerssuppliers bankers and all the other stakeholders for their continued support and theirconfidence in its management.

For and on behalf of the Board of Directors

RAHUL C. KIRLOSKAR

Executive Chairman

Place: Pune

Date: May 27 2014.

ANNEXURE I TO THE DIRECTORS' REPORT

Information as required under Section 217(1)(e) of the Companies Act 1956

A. Conservation of Energy

a) Energy Conservation measures taken: Total 33 EnCon projects implemented by using newtechnology by waste elimination by reuse and recycling in different areas like powerprocess lighting natural resources. Some of the projects are as under.

Continuous projects

*Energy saving by reducing operating voltage of power transformer by changing theposition of off load tap changer.

* Switch ‘OFF’ Power Transformer at no load condition and save no loadlosses.

* Maintain Unity Power Factor and avail the 7% incentive benefit from MSEDCL onElectricity Consumption.

* Maximum demand control through remote control operation.

* Transformer of 1 MW gear testing to put off during no load and holiday to avoid noload power consumption.

* Rigorous Maintenance of Air Compressed Grid and Reduced Air Leakage.

* Saving in oil consumption through oil extraction from chips using a Centrifuge.

(Recycle) Productivity improvement projects

* Rearranging the mounting of gears (fixture) in hobbing operation.

* Use of taper hard jaw for motor mount bracket.

* Elimination of OD and ID grinding operation.

* Use of twin lip finish boring tool.

* Process modification in SRM gear housing operation.

* Short peening of 4 nos. Railway pinions in single cycle.

* Productivity improvement by process modification for railway pinions.

New projects

A. New Technology

* A new Technology replaced old and inefficient 90kW Air Compressor with 55kW energyefficient Screw Compressor at Transmission division.

* Use of energy efficient LED lights in place of T-5 fitting in transmission division.

* Use of all in one desktop computer by replacing CRT monitor by information technologydepartment.

* Use of energy efficient split (5 star labelled) /cassette Air Conditioner in officearea.

B. Waste elimination

* Operation of main motor of knock out machine in star through control circuitmodification to get energy saving in foundry.

* Use of AC drive for water circulation pump of paint shop in dispatch area of aircompressor division.

* Reuse of wooden material for the packaging of product transportation.

* Carried out Energy and Water Audit by TUV India Pvt. Ltd. Pune for Hadapsar Plant.

* Under partnership and process improvement carried out Energy Audit of KPCL’sesteemed 5 vendors to guide them for the energy conservation. Identified energy saving peryear is Rs. 0.63 Million kWh and cost saving is Rs. 5.27 Million.

b) Additional Investments and Proposals if any being implemented for reduction ofconsumption of energy.

Continuous Projects

* Energy saving by reducing operating voltage of power transformer by changing theposition of off load tap changer.

* Switch ‘OFF’ Power Transformer at no load condition and save no loadlosses.

* Maintain Unity Power Factor and avail the 7% incentive benefit from MSEDCL onElectricity Consumption.

* Maximum demand control through remote control operation.

Transformer of 1 MW gear testing to put off during no load and holiday to avoid no loadpower consumption.

* Rigorous Maintenance of Air Compressed Grid and Reduced Air Leakage.

* Saving in oil consumption through oil extraction from chips using a Centrifuge.

(Recycle) New EnCon Proposals A . Process Improvement

* Process modification in liner opening operation for productivity improvement.

* Productivity improvement of railway pinion operation.

* Energy saving by changing temperature setting of carburizing process.

* Energy saving by changing design of fixtures for tempering cycle.

B. New Technology

* Use of energy efficient LED lights in place of 36W/40W FTL.

* Use of 5 star rated energy efficient air conditioners in CMM room of Air compressordivision.

(New Technology)

C. Recycle and Reuse

* Water conservation by implementing recommended measures in Water Audit Report.

D. Waste elimination

* Use of single switch to control the lighting operation.

* Started conversion of aluminium turning into LM 13 INGOTS for production inNon-Ferrous Foundry.

Investment

Estimated additional investment for above proposals is about Rs. 6.65 Million.

c) Impact of the measures at (a) and (b) for reduction of energy consumption andconsequent impact on the cost of production of goods:

Estimated saving from activities mentioned in (a) and (b) above is about Rs.15.87 Million per year.

d) Total Energy consumption and energy consumptions per unit of production as perprescribed Form-A:

Not given as the Company is not covered under the list of specified industries.

B. Technology Absorption :

Research and Development (R and D) :

1. Specific areas in which R and D is carried out by the Company:

* Developed couple free compressor for PET application.

* Communication system designed for feedback and monitoring of compressors.

* Development of high pressure screw compressor for water well application.

* Development of Integrated Air Compressor and Storage System for Akash missile forArmy. mounted on TATRA truck.

* Development of Oxygen Charger for Indian Air Force Application.

* Development of KCW 623 M* for railway compressor requirements.

* Design of Refrigeration Compressor KCX42/KCX51 KCX63 and KCX72 (Two Stage Air CooledSeries).

* Customized design of Engineered Compressor Drive Set (KC KCX).

* Development of Indigenous couple free CNG Compressor.

* Development of Refrigeration Compressor KCX21 (Air Cooled Series).

* Development of Indigenous CNG Compressor (KGC Series).

* Design and Development of various High Power Density (HPD) Industrial Gearboxes.

* Design and Development of Windmill Gearbox.

* Design and Development of Light Weight Marine Gearbox.

2. Benefits derived as a result of above R and D:

* In house design capability for centrifugal compressors.

* PET bottling market can be addressed with technological edge.

Modern monitoring technology for the compressors will help handling of AMC’s andtracking performance parameters of the compressors effectively.

* Strengthen water well market presence.

* 100% market share for Akash missile system.

* Further business expected from Oxygen chargers from Indian Air Force.

* Strengthen railway compressor business.

* Increasing of two stage KC/KCX Compressor/Customised Engineered Compressor Drive Setshare in export market.

* New market entry in Vapor Absorption Chiller.

* Business growth in Marine Refrigeration and Air - Conditioning (HVAC solutions)market.

* Business growth in Cement and Power Industry.

* New market for products in Pump and Compressor Drives.

* Business Growth in Industrial Gearbox Segment.

* Business growth in Planetary Wind Turbine Gearboxes.

* Business growth in Low Power Marine Gearboxes.

3. Future plan of Action:

1. Build capability to handle gases other than air and also capability to handledifferent applications.

2. Design and development of new Refrigeration Compressors KCX12 / KCX93 / KCX84 /KCX102 (12 Cylinder - Air cooled series).

3. Design and development of new combinations in CNG compressors.

4. Manufacture of CNG Compressors.

5. Design and development of Forced Lubrication systems for Industrial Gearboxes.

4. Expenditure on R and D (Rs. in Million)
a) Capital NIL
b) Recurring 58.09
c) Total 58.09
d) Total R and D Expenditure as a Percentage of total turnover 1.14%

5. Technology Absorption Adaptation and Innovation:

1. Efforts in brief made towards Technology Absorption Adaptation andInnovation:

1. Building expertise for the application and product in the area of special products.

2. Addition of 3 nos. of Creo (Pro-E) software for 3D modeling and analysis.

3. Absorption of Planetary Technology.

4. Absorption of HPD Industrial Gearbox Technology.

2. Benefits derived as a result of the above efforts :

* Bridging product gaps in the domestic and International market (KCX - Air Cooledseries).

* Increasing use of available expertise for manufacturing products to get share inuntapped market.

* Increase in market share through addition of new range of products.

3. Information regarding Imported Technology during last 5 years

Technology Imported and fully absorbed Year of Import
Development of Centrifugal Compressor. 2010

 

C. Foreign Exchange Earnings and Outgo:
Foreign exchange outgo Rs. 617 Million
Foreign exchange earned Rs. 246 Million

 

For and on behalf of the Board of Directors
Place: Pune RAHUL C. KIRLOSKAR
Date: May27 2014. Executive Chairman