TO THE MEMBERS
The Directors are pleased to present the Seventh Annual Report together with theAudited Statement of Accounts for the year ended 31 March 2016.
FINANCIAL RESULTS (STANDALONE)
(Rs in crores)
|Particulars ||2015-16 ||2014-15 |
|Total Revenue ||2528.63 ||2566.04 |
|Profit before exceptional and extraordinary items and tax ||202.14 ||205.43 |
|Exceptional Items ||25.48 ||- |
|Profit before tax ||176.66 ||205.43 |
|Tax Expense (Current and Deferred Tax) ||36.13 ||62.29 |
|Net Profit for the Period ||140.53 ||143.14 |
|Profit Brought Forward ||480.75 ||443.91 |
|Add: Net surplus in the statement of Profit & Loss balance of residuals undertaking of Kirloskar Brothers Investments Limited transferred under Composite Scheme of Arrangement and Amalgamation ||13.20 ||- |
|Profit Available for Appropriation ||634.48 ||587.05 |
|Transfer to General Reserve ||14.05 ||14.31 |
|Other Appropriations ||- ||4.96 |
|Dividend and dividend distribution tax ||87.03 ||87.03 |
|Balance of the Profit carried forward ||533.40 ||480.75 |
COMPANY'S FINANCIAL PERFORMANCE
Despite the challenging macroeconomic environment the net sales of the Company were ~2419 crores as compared to the previous fiscal to~ 2473 crores. Profit from operations(before exceptional items) was~ 177 crores as against~ 205 crores in the previous year.The Profit After Tax was~ 141 crores as against ~ 143 crores in the previous year.
For the year under review the Directors have declared an interim dividend of 250% ~5per share) for the year ended 31 March 2016. The directors recommend that the interimdividend so declared and paid be the final dividendforthe Financia1Year2015-16. (PYFinalDividend @250%.~5per share).
Total dividend payout for the year was ~ 87.03 crores including payment of~ 14.72crores as dividend distribution tax.
SUBSIDIARY COMPANY AND CONSOLIDATED FINANCIAL STATEMENTS
During the year under review the Company has invested USD 250000 in 'KOELAmericasCorp.' (50 Shares of USD 5000 each) incorporated under State of Delaware laws UnitedStates of America and based in Houston Texas. With this 'KOELAmericas Corp.' has become100% subsidiary of the Company with effect from 23 June 2015.
Brief Business Highlights of Subsidiary Company
KOELAmericas Corp. was incorporated in March 2015 and became a 100% subsidiary ofKirloskar Oil Engines Ltd in June 2015. It was established with a strategic intent topenetrate into the North American market including USA and Canada as well as focus on theLatin American region.
The revenues of KOEL Americas Corp. during fiscal year under review represents sale ofdiesel engines and generators in Latin America.
The Sales areas of the Central American Region include Guatemala Nicaragua Panamaand Honduras. The Kirloskar Green Generators were launched in the market of NicaraguaKOELAmericas Corp. has taken initiatives towards promotion of brand & products andalso participated in Expica Exhibition in Nicaragua.
For commencement of business of supply of diesel engines in North America KOELAmericasCorp. is required to obtain approval from Environment Protection Agency (EPA). KOELAmericas Corp. has started application process for obtaining approval from EPA. Inparallel KOEL Americas Corp. is also focusing on sales within USA to Original EquipmentManufacturers (OEMs) for different applications that can use non-EPA engines to buildtheir equipment for supplying to North America.
For the fiscal ended 31 March 2016 the Sales Revenue was US$ 502402 (~ 3.34 Crores)with a Profit from operations ofUS$19931 (~0.13 Crores)and Net Profit after Tax of US$16941 (~0.11 Crores).
The consolidated financial statements of the Company and its subsidiary prepared inaccordance with Accounting Standard 21 issued by Institute of Chartered Accountants ofIndia forms part of Annual Report. A statement containing salient features of thefinancial statements of the subsidiary company is attached to the Financial Statements ofthe Company in FormAOC-1.
Pursuant to the provisions of Section 136 of the Companies Act 2013 the financialstatements of the Company consolidated financial statements along with relevant documentsand separate un-audited financial statements of subsidiary are available on website of theCompany.
The annual accounts of subsidiary and related detailed information will be kept forinspection by any shareholders at the Registered Office of the Company and will also bemade available to the shareholders on demand at any point of time.
COMPOSITE SCHEME OF ARRANGEMENT AND AMALGAMATION
The Composite Scheme of Arrangement and Amalgamation (Composite Scheme) betweenKirloskar Brothers Investments Limited (KBIL- Transferor Company I Demerged Company)Pneumatic Holdings Limited (PHL-Resulting Company) and Kirloskar Oil Engines Limited (KOEL- Transferee Company) and their respective shareholders and creditors under Section 391 to394 and other applicable Sections of the Companies Act 1956/2013 was sanctioned byHon'ble High Court of Judicature at Bombay vide its order dated 30 April 2015. The saidComposite Scheme has been effective from 30 June 2015.
Pursuant to the said Composite Scheme 80388514 equity shares held by KBIL in KOELwere cancelled on account of Cross holdings and same number of equity shares were allottedto the shareholders of KBIL. Accordingly KBIL ceased to be Holding Company with effectfrom 30 June 2015. There is no change in total paid-up share capital of the Company preand post Composite Scheme.
The said Composite Scheme became operative retrospectively with effect from 1 April2015 (the Appointed Date).
a) Changes in Composition of the Board of Directors
During the year under review as a result of his pre-occupations and other commitmentsDr. Naushad D. Forbes Non-Executive Independent Director of the Company tendered hisresignation from the office of Director of the Company. This was effective 19 February2016. The Company expresses its appreciation for the assistance and guidance provided byDr. Naushad D. Forbes during his tenure as Director of the Company.
In compliance with Section 149 of the Companies Act 2013 and SEBI (Listing Obligationsand Disclosure Requirements) Regulations 2015 the Board of Directors of the Companyappointed Mr. Vinesh Kumar Jairath as Additional Director of the Company in the capacityof 'Non-Executive Independent Director' effective 27 January 2016. In accordance withSection 161 of the Companies Act 2013 he will hold office of Director up to date ofensuing Annual General Meeting. The Company has received requisite notice in writing froma member proposing his candidature for office of Director. The resolution seeking approvalof the Members for the appointment of Mr. Vinesh Kumar Jairath for a term of 5 years havebeen incorporated in the notice of the forthcoming Annual General Meeting of the Company.
Rajendra R. Deshpande who retire by rotation at the ensuing Annual General Meeting andbeing eligible offer himselffor re-appointment.
The brief resumes and other details relating to the Directors who are proposed to beappointed I re-appointed as required to be disclosed under SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 forms part of the Notice of Annual GeneralMeeting.
b) Changes in Key Managerial Personnel
No changes in Key Managerial Personnel appointed by the Company in FY2014-15.
c) Declarations from the Independent Directors
The Company has received declarations from all the Independent Directors of the Companyconfirming that they meet the criteria of independence as prescribed under Section 149 (6)of the Companies Act 2013 and 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 Boardcarried out a formal review for evaluating the performance and effectiveness of the BoardCommittees of the Board and of the individual directors including the Chairman of theBoard.
The performance of the Board was evaluated on the basis of criteria such as the boardcomposition and structure effectiveness of Board processes participation in assessmentof annual operating plan risks etc.
Using appropriate criteria the performance of the various Committees was separatelyevaluated by the Board.
In a separate meeting of Independent Directors performance of non-ndependentdirectors performance of the Board as a whole and performance of the Chairman wereevaluated taking into account the views of executive directors and non-executivedirectors.
A separate exercise was carried out to evaluate the performance of individual Directorsincluding the Chairman of the Board who were evaluated on parameters such as achievementagainst key performance objectives attendance at meetings time devoted for the Companycontribution in the Board process etc.
e) Nomination and Remuneration Policy
The Board has on the recommendation of the Nomination and Remuneration Committeeadopted a policy for selection and appointment of Directors Key Managerial PersonnelSenior Management and their remuneration. The Nomination and Remuneration Policy isannexed herewith as Annexure A.
f) Number of meetings of the Board
During period under review five (5) Board Meetings were held the details of whichforms part of Report on Corporate Governance.
g) Composition of Audit Committee
The Composition of Audit Committee forms part of Report on Corporate Governance.
PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS
During the year under review the Company has invested USD 250000 in equity capital of'KOEL Americas Corp.' USA. The details of which are given in the Financial Statements.The Company has not granted any Loans and Guarantees covered under Section 186 of theCompanies Act 2013.
PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES
All related party transactions that were entered into during the Financial Year 2015-16were at an arm's length basis and were in the ordinary course of business. Hence thereare no transactions to be reported in Form AOC-2. There were no materially significantrelated party transactions made by the Company that would have required members' approvalunder SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015. AllRelated Party Transactions are placed before the Audit Committee for approval after beingduly certified by the Statutory Auditors.
The policy on Related Party Transactions as adopted by the Board is uploaded on theCompany's website.
The disclosures as per AS 18 for transactions with related parties are provided in theFinancial Statements of the Company.
RISK MANAGEMENT POLICY
The risk management process has been established across the organization whichfacilitates identification assessment and formulation of mitigation plans for risks thataffect the achievement of Company's objectives. It is embedded across all the majorfunctions and businesses and aligned to the Company's vision and goals.
The risks are identified evaluated and mitigated at the business and Enterprise level.The risk registers and their mitigation plans are monitored with the support of an ITenabled system.
Risk owners are identified for each risk and mitigation plans are formulated throughprojects planned and executed from short and long term perspective. The Internal AuditDepartment facilitates the risk management process and senior management oversees theframework to ensure that major strategic people related environmental economic andoperational risks that the organization faces are reviewed.
The business risks which are reviewed based on impact and likelihood are presented tothe senior management for review at periodic intervals. The Enterprise risks presented arereviewed by the Audit Committee and Board on a periodic basis.
INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO THE FINANCIAL STATEMENTS
The Company has an Internal Control Framework which is commensurate with the sizescale and complexity of its operations. This framework ensures adequate safeguards andprocesses to address the evolving business requirements. Key controls have been identifiedalong with risks and mitigation processes covering major areas across all businesses andfunctions. Internal controls are reviewed by Internal Audit Department on a periodicalbasis.
Strengthening of controls is a continuous and evolving process in the Company. Based onobservations I findings and recommendations of the internal audit team process ownersundertake preventive and corrective actions which are then horizontally deployed acrossthe organization.
CORPORATE SOCIAL RESPONSIBILITY
The Company has always believed in working for the betterment and upliftment of thesociety. Corporate Social Responsibility (CSR) has been practiced and eng rained over theyears in the Company.
The focus areas under CSR have remained consistent over the years and include: HealthEducation and Environment. The Composition of CSR Committee of the Board and Report on CSRactivities is annexed herewith as Annexure B.
VIGIL MECHANISM /WHISTLE BLOWER POLICY
The Company has a Vigil Mechanism I Whistle Blower Policy to deal with instances offraud unethical behavior mismanagement etc. The Policy provides a mechanism foremployees of the Company and other persons dealing with the Company to report to theChairman of the Audit Committee any instance of unethical behaviour actual or suspectedfraud or violation of the Company's code of conduct. No person has been denied access tothe Audit Committee in this regard. The Policy is uploaded on the Company's website.
The details forming part of the extract of the Annual Return in form MGT 9 is annexedherewith as Annexure C.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE AND OUTGO
Information relating to conservation of energy technology absorption and foreignexchange earnings and outgo as required under section 134 (3)(m) of the Companies Act2013 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 Section197(12) of the Companies Act 2013 read with Rule 5 of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 are annexed in Annexure E ofthis report.
The particulars of employees pursuant to section 197(12) of the Companies Act 2013read with Rule 5(2) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 form part of this report. In terms of Section 136 (1) of theCompanies Act 2013 the Directors' report is being sent to the shareholders without thisAnnexure. The Shareholders interested in obtaining a copy of this annexure may write tothe Company Secretary at the Company's registered office.
POLICY ON PREVENTION OF SEXUAL HARASSMENT
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 actsor instances of Sexual Harassment at work and ensures that all employees are treated withrespect and dignity. During the year under review 1 complaint was received and resolvedby the Company.
During Financial Year 2015-16
a) There were no public deposits accepted by the Company pursuant to provisions of theCompanies Act 2013 including rules thereunder.
b) There were no significant and material orders passed by the regulators or courts ortribunals impacting the going concern status and Company's operations in future.
c) Neither the Managing Director nor the Whole-time Directors of the Company receivedany remuneration or commission from subsidiary.
a) Statutory Auditors
It is proposed to re-appoint Mls. P. G. Bhagwat Chartered Accountants Pune (FirmRegistration Number 1 01118W) as Statutory Auditors of the Company for a second term of 5consecutive years to hold office from conclusion of this Annual General Meeting till theconclusion of the Annual General Meeting to be held in the year 2021 subject toratification at every Annual General Meeting. The members are requested to consider theirre-appointment and authorize the Board of Directors to fix their remuneration. The Companyhas received requisite certificate pursuant to Section 139 of the Companies Act 2013.
There are no adverse remarks I qualifications of Statutory Auditors on financialstatements for the year ended 31 March 2016.
b) Cost Auditors
The Company has appointed Mls. Parkhi Limaye and Co. as Cost Auditors of the Companyfor the Financial Year 2016-17 under section 148 of the Companies Act 2013 and rulesthereof.
c) Secretarial Audit Report
The Company has appointed Mr. M. J. Risbud Practicing Company Secretary to conductSecretarial Audit of the Company for the Financial Year 2016-17 under section 204 of theCompanies Act 2013 and the rules thereof. The Secretarial Audit Report is annexedherewith as Annexure F.
There are no adverse remarks I qualifications of Secretarial Auditors in theSecretarial Audit Report for the year ended 31 March 2016.
MANAGEMENT DISCUSSION &ANALYSIS AND REPORT ON CORPORATE GOVERNANCE
The Management Discussion & Analysis and the Report on Corporate Governance asrequired under SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015form part of this Annual report.
A Certificate from the Statutory Auditors of the Company regarding compliance withconditions of corporate governance as required under Clause 49 of the listing agreement/SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 also forms partof this Annual Report.
DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to Section 134 of the Companies Act 2013 the Directors based on therepresentations received from the Operating Management confirm that:
a) In preparation of the annual accounts the applicable accounting standards have beenfollowed and that there are no material departures;
b) they have in the selection of the accounting policies consulted the StatutoryAuditors and have applied them consistently and made judgments and estimates that arereasonable and prudent so as to give a true and fair view of the state of affairs of theCompany as at 31 March 2016 and of the profit of the Company for the year ended on thatdate;
c) they have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding assets of the Company and for preventing and detecting fraud and otherirregularities;
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 andsuch internal financial controls are adequate and operating effectively; and
f) they have devised proper systems to ensure compliance with provisions of allapplicable 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 andexpectations may constitute 'forward looking statements' within the meaning of applicablelaws and regulations. Actual results may differ materially from those either expressed orimplied.
The Directors would like to place on record their appreciation of the contribution madeand support provided to the Company by the shareholders employees bankers suppliers andcustomers.
| ||Forand on behalfofthe Board of Directors |
| ||Sd/- |
|Date: 18 May2016 ||ATULC. KIRLOSKAR |
|Place: Pune ||Executive Chairman |
TO THE DIRECTORS' REPORT NOMINATION AND REMUNERATION POLICY
This Policy applies to the Board of Directors Key Managerial Personnel and SeniorManagement Personnel of Kirloskar Oil Engines Limited ('the Company').
The policy envisages the framework for nomination remuneration and evaluation of Boardof Directors Key Managerial Personnel and Senior Management Personnel in accordance withprovisions of Companies Act 2013 ('the Act') including rules thereof and SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 (Listing Regulations 2015).
The Company aims to achieve balance of merits experience and skills amongst itsDirectors Key Managerial Personnel and Senior Management Personnel.
1. "Board" means Board of Directors of the Company.
2. "Committee" means Nomination and Remuneration Committee of theCompany as constituted or re-constituted by the Board from time to time.
3. "Key Managerial Personnel" (KMP) means a) Chief ExecutiveOfficer or Managing Director or the Manager b) Whole-time Director c) Chief FinancialOfficer d) Company Secretary and e) such other officers as may be prescribed under the Actfrom time to time
4. "Senior Management Personnel" (SMP) means personnel of theCompany who are members of the core management team excluding Board of Directors and areone level below the Executive Director including Functional Heads.
Ill. APPOINTMENT AND REMOVAL OF DIRECTOR KMPAND SMP
1. The Committee shall consider the qualification skill expertise and experience ofthe person for appointment as Director KMP or at Senior Management level and accordinglyrecommend to the Board his I her appointment.
2. The age of person to be appointed as a Non-Executive Director shall not be less than21 years and more than 75 years. Under exceptional circumstances the Committee may at itsdiscretion recommend to the Board waiver of upper age limit.
The age of person to be appointed as an Executive Director shall not be less than 21years and not more than 70 years.
3. The Company should ensure that the person so appointed as Director is notdisqualified under the Companies Act 2013 rules made thereunder Listing Regulations2015 or any other enactment for the time being in force.
4. The Director /Independent Director/ KMP/ Senior Management Personnel shall beappointed as per the procedure laid down under the provisions of the Companies Act 2013rules made thereunder Listing Regulations 2015 or any other enactment for the time beingin force.
5. The Committee may recommend to the Board for removal of a Director on account of anydisqualification mentioned in the Companies Act 2013 rules made thereunder or under anyother applicable Act rules and regulations or any other reasonable ground. The Committeemay also recommend to the Board for removal of KMP or SMP subject to the provisions andcompliance of the applicable Act rules and regulations.
IV. BOARD DIVERSITY
The Board shall have an optimum composition of Directors by ensuring experts fromdifferent fields viz. finance law management sales marketing engineering researchtechnical operations or any other areas related to the Company's business. There will be abalance of skills and experience to steer the Company towards achievement of its Visionand attainment of its short term and long term objectives.
V. REMUNERATION OF DIRECTOR KMPAND SMP
The Board of Directors of the Company shall decide the remuneration of Executive INon-Executive Directors on the basis of recommendation of the Committee subject to theoverall limits provided under the Companies Act 2013 and rules made thereunder includingany amendments modifications and re-enactments thereto ('the Act') and in compliance withthe provisions of the Act and Listing Regulations 2015 as applicable from time to time.
i. EXECUTIVE DIRECTORS:
The Company shall enter into a contract with every Executive Director which will setout the terms and conditions of appointment and tenure as recommended by the Committee andapproved by the Board.
The Board may vary any terms or conditions of the contract from time to time within thetenure subject to such approvals as may be required under the Act.
The remuneration components shall include inter alia:
a. Fixed salary:
Each Executive Director shall be paid fixed salary consisting of basic salary and suchallowances and perquisites as may be approved by Board based on recommendation ofCommittee and performance evaluation of each Executive Director from time to timesubjectto overall limits as prescribed under the Act.
The Board may approve payment of commission subject to the limits provided in the Act.The eligibility and the amount of commission to be paid to each director shall berecommended by the Committee on the basis of the performance evaluation of the directorundertaken by the Committee and the Board.
c. Non-monetary benefits:
Executive Directors may be entitled to club membership company vehicle with driverpetrol reimbursement vehicle maintenance telephone fax internet at residencereimbursement of mobile phone bills fully furnished accommodation (in case of use of ownresidential property for accommodation) or house rent allowance in lieu thereof soft andhard furnishings reimbursement of house maintenance expenditure reimbursement of gaselectricity bill water and other utilities and repairs at residence reimbursement ofmedical expenditure including hospitalization expenses for self and family and leavetravel assistance.
Executive Director may also be entitled to personal accident insurance group accidentinsurance coverage medical insurance coverage term insurance or any other benefit as perCompany policy.
d. Separation I Retirement benefits:
Executive Director shall be eligible to the following perquisites which shall beincluded in the computation of the ceiling on remuneration provided in the Act:
(a) Contribution to provident fund superannuation fund or annuity fund to the extentthese either singly or put together are not taxable under the Income tax Act 1961 or anyamendment thereof
(b) Gratuity payable at a rate not exceeding one month's salary for each completed yearof service and
(c) Encashment of leave at the end of the tenure
In case of loss or inadequacy of profits of the Company the aforesaid perquisitesshall not be included in computation of the ceiling on remuneration provided in the Act.
ii. NON-EXECUTIVE DIRECTORS:
The Company shall issue a letter of appointment to every Non-Executive IndependentDirector.
The components of payment of remuneration to Non-Executive Directors shall include:
a. Sitting fees :
Sitting fees shall be paid for Board Meetings and any Committee Meetings attended bythe Director. Different amount of sitting fees may be paid for different types of meetingswithin limits as prescribed under the Act.
Committee shall include Audit Committee Nomination and Remuneration CommitteeStakeholders' Relationship Committee Corporate Social Responsibility Committee or suchCommittees as may be constituted by the Board from time to time.
The Board may approve payment of commission subject to the limits provided in the Act.The eligibility and the amount of commission to be paid to each director shall berecommended by the Committee on the basis of annual performance evaluation of thedirector.
c. Professional fees:
Non Independent Directors may be paid fees for services of professional nature if inthe opinion of Committee the director possesses the requisite qualification for thepractice of the profession. Such professional fees shall not be considered as remunerationfor the purpose of Act.
B) KEY MANAGERIAL PERSONNELAND SENIOR MANAGEMENT PERSONNEL
The remuneration components payable to KMP I SMP may be:
a. Fixed salary:
Each KMP I SMP shall be paid fixed salary consisting of basic salary and suchallowances and perquisites as per service rules of the Company. The band of the salaryshall be determined according to the industry standards market conditions scale ofCompany's business relating to the position educational qualification parameters andexperience in the industry as detailed in the service rules of the Company and such otherfactors as may be prescribed therein.
The same shall be reviewed annually based on the Company's annual appraisal policy.
b. Variable pay:
A portion of the overall salary may be paid as Variable pay to every KMPISMP. Thisshall be as per the Performance Linked Pay Scheme of the Company which is designed tobring about increase in overall organizational effectiveness through alignment of CompanyFunctional and Individual objectives.
c. Perquisites I Other Benefits:
Perquisites I Other Benefits are benchmarked with Industry practices from time to timekeeping an overall salary structure in mind. These may include petrol reimbursementvehicle maintenance telephone reimbursement of mobile phone bill and reimbursement ofmedical expenditure for self and family and such other benefits as per Company Policy.
KMP I SMP may be entitled to personal accident insurance group accident insurancecoverage medical insurance coverage term insurance and such other benefits as perCompany policy.
d. Annual Pay Revision I Promotion
Evaluation of KMP I SMP shall be based on appraisal against stated Objectives I Goalsof the individual which in turn shall be aligned to the Functional and Enterprise ScoreCard. Key Result Areas (KRAs) are set at the beginning of the year in consultation withthe Executive Director. Pay revisions I promotions will be achievement oriented and willalso have reference to Industry benchmarks where appropriate.
e. Separation I Retirement benefits:
Separation I retirement benefits as per Company policy which shall include contributionto provident fund superannuation gratuity and leave encashment.
C) DIRECTORS AND OFFICERS LIABILITY INSURANCE:
The Company may take Directors and Officers liability insurance or such insurance oflike nature for indemnifying any of the Directors or its KMP against any liability inrespect of any negligence default misfeasance breach of duty or trust for which theymay be guilty in relation to the Company.
The premium paid on such insurance shall not be treated as part of remuneration payableto Managing Director Whole Time Director Chief Executive Officer Chief FinancialOfficer or Company Secretary. Provided that if any such person is proved to be guilty thepremium paid shall be treated as part of the remuneration.
D) STOCK OPTIONS
The Committee may recommend issue of stock options to directors (other than independentdirectors and promoter directors) or KMP I SMP which may be granted by the Board subjectto the compliance of the provisions of applicable laws.
VI. CRITERIA FOR EVALUATION OF BOARD
The evaluation of Board shall be carried out annually as per provisions oftheActincluding rules thereof and Listing Regulations 2015. Performance Evaluation of eachdirector will be based on the criteria as laid down from time to time by the Nominationand Remuneration Committee.
i. Executive Director
Performance evaluation of each Executive Director will be based on achievement againstthe key short and long term performance objectives which in turn would be aligned towardsthe Company's overall Vision and strategic objectives. The Balance Score Card (BSC) orother appropriate tool will be used to define the Strategic Objectives measures and goalsover a 5 year horizon. Business and individual goals will be cascaded from the BSC.
ii. Non-Executive Director
Performance evaluation of each Non-Executive Director will be based on attendance inboard and its committee meeting membership/ chairmanship of the committees of the Boardtime devoted for the Company contribution in the Board process and such other criteria asmay be considered by the Committee from time to time.
Based on the recommendation of the Committee the Board reserves its right to amend ormodify this Policy in whole or in part at any time when it deems appropriate or inaccordance with any amendment to the applicable provisions of the Act including rulesthereof and I or the provisions of the Listing Regulations 2015.
For and on behalf of Board of Directors
of Kirloskar Oil Engines Limited
Atul C. Kirloskar
TO THE DIRECTORS' REPORT
ANNUAL REPORT ON CSRACTIVITIES
[Pursuant to Section 135 of the Companies Act 2013 read with the Companies (CorporateSocial Responsibility Policy) Rules 2014]
A. CSR Report
|1. ||A brief outline of the Company's CSR policy including overview of projects or programmes proposed to be undertaken and a reference to the web-link to the CSR policy and projects or programmes. ||The Company has adopted the Corporate Social Responsibility (CSR) policy. Eligible funds for CSR activities will be expended in the areas of Education Environment Health etc. through one or more trusts OR directly. These CSR activities will be carried out through various programmes or projects as specified in the CSR Policy. The CSR policy is available on the website of the Company. (web-link- http://koel.kirloskar.com/sites/koel.kirloskar.com/pdfs/CSR- Policy. pdf) |
|2. ||The Composition of the Committee. ||1. Mr. Rahul C. Kirloskar Chairman |
| || ||2. Mr. Nihal G. Kulkarni Member |
| || ||3. Mr. Pradeep R. Rathi (appointed as a member w.e.f. 9March2016) |
| || ||4. Dr. Naushad D. Forbes (ceased to be a member w.e.f 19 February2016) |
|3. ||Average net profit of the Company for last three financial years ||~ 240.71 crores (as per Section 198 of the Companies Act 2013) |
|4. ||Prescribed CSR Expenditure (two percent of the amount as in item 3 above) ||at least Rs. 4.81 crores |
|5. ||Details of CSR spent for the financial year: || |
| ||a. Total amount spent for the financial year ||~ 4.93 crores |
| ||b. Amount unspent if any ||Nil |
| ||c. Manner in which the amount spent during the financial year ||The manner in which the amount is spent is detailed in Part B to this Annexure. |
|6. ||In case the Company has failed to spend the two per cent of the average net profit of the last three financial years or any part thereof the Company shall provide the reasons for not spending the amount in its Board report. ||Not applicable |
|7. ||A responsibility statement of the Committee that the implementation and monitoring of CSR Policy is in compliance with CSR objectives and policy of the Company. ||The implementation and monitoring of CSR Policy is in compliance with CSR objectives and Policy of the Company. |
B. CSR Expenditure for FY 2015-16
|Sr. No. ||CSR project or activity identified ||Sector in which the project is covered ||Projects or programs ||Amount outlay (budget) project or programs wise ||Amount spent on the projects or programs ||Cumulative expenditure upto the reporting period ||Amount Spent: Direct or through implementing agency |
| || || ||1) Local area or other || ||Sub-heads: ||(Rs in Crs.) ||(Rs in Crs.) |
| || || ||2) Specify the state and district where projects or programs were undertaken || ||1) Direct expenditure on projects or programs || || |
| || || || || ||2) Overheads (Rs in Crs.) || || |
|1 ||Financial assistance for education Sponsoring unemployed youth for vocational courses Scholarship to students Vocational training programmes for women for income generation Computer Literacy Programmes etc. ||Education ||Pune Kagal Nasik (Maharashtra) & Rajkot (Gujarat) ||Amount not specified ||4.15 ||4.15 ||4.15 Partially direct and partially through implementation agency |
|2 ||Programmes on energy conservation Kirloskar Vasu nd hara film festival Pest control measures PUC Checkup of vehicles Contribution to animal welfare project etc. ||Environment ||Pune Kagal Nasik (Maharashtra) & Rajkot (Gujarat) ||Amount not specified ||0.34 ||0.34 ||0.34 Partially direct and partially through implementation agency |
|3 ||HIV aids awareness program Health checkup camps Hygine awareness programmes etc. ||Health ||Pune Kagal Nasik (Maharashtra) & Rajkot (Gujarat) ||Amount not specified ||0.42 ||0.42 ||0.42 |
| || || || || || || ||Partially direct and partially through implementation agency |
|4 ||Village development Programmes ||Rural Development ||Kagal (Maharashtra) ||Amount not specified ||0.02 ||0.02 ||0.02 Direct |
|TOTAL || || || || ||4.93 ||4.93 || |
Details of implementing agency: Kirloskar Institute of Advanced Management and Studies(KIAMS) Vasundhara Club Kirloskar Foundation and others.
|Sd/- ||Sd/- |
|Rahul C. Kirloskar ||Nihal G. Kulkarni |
|Chairman of CSR Committee ||Managing Director |
ANNEXURE 'D' TO THE DIRECTORS' REPORT
A. Conservation of Energy
The Company is committed to optimizing use of energy in operations and also bring aboutcontinuous improvements in the efficiency of processes and products through use of energyefficient and renewable energy technologies.
I. The steps taken for energy conservation and its impact
Energy Efficient VRF air conditioning system for office of CRE division
Energy Efficient LED Lighting installed in new office areas
Energy Efficient Localize lighting in assembly sections and machine shops resulted insaving of approximately 1 78000 units p.a.
Energy saving of approximately 1 23300 units p.a. through modification to PLClogic lighting circuit etc.
Avoidance of wastage of compressed air and electricity during idle time of machinesaving of approximately 89000 Units p.a.
Energy Cost reduction through cycle time reduction in Machine Shop resulting insaving of 121000 units p.a.
Reconditioning of cooling towers to improve their Energy Efficiency
High wattage Mercury Lamps replaced by Low watt Metal halide lamps keeping sameillumination level
Motion sensor for office lighting installed in Material and Manufacturingdepartment Installation of Solar Water System at Canteen for dishwashing
Installation of Solar Water System for engine degreasing Energy Efficient LEDLighting installed in office areas
Energy Efficiency initiatives taken viz. Installation of PLC and Drive panel forTesting Relay based control panel for testing conveyor Control panel interlocking atengine degreasing station etc.
II. Steps taken by the company for utilizing alternate sources of energy
i. Third Party Windmill Units purchase from independent Windmill generator under openaccess policy. Approximately 35 Lacs Windmill Units consumed through this arrangementwhich resulted to maintain 23% of Green Energy share of total energy consumption at Kagalplant
ii. Use of Natural Gas for process at Rajkot plant
Ill. The capital investment on energy conservation equipment
The Company made a capital investment of~ 0.63 crores on energy conservation equipment
B. Technology absorption
i. Efforts made towards technology absorption
The Company is working closely with legislative bodies such as PCRA CPCB BISresearch institutes such as ARAI VRDE li TO industry associations such as IDEMA Cll.It also works with OEMs and end customers and suppliers to identify opportunities fordesign development and improvements of products
ii. Benefits derived and results of above efforts product improvements costreduction product development import substitution etc.
Portable range of diesel and petrol engine driven genset products meeting CPCB Stage IIemission norms were developed and launched
Company wide initiative to reduce raw material cost has been taken and R&Dcontributed substantially to ideation and evaluation phase. Implementation phase is inprogress
Import of substitutes for E Governor Fuel Injection Equipment Controllers etc.
Development of compact products for multiple applications without compromisingperformance and durability
iii. In case of imported technology (imported during the last three years reckoned fromthe beginning of the FinanciaiYear)-
The details of technology imported:
The Company entered into MOU with MTU Friedrichshafen GmbH Germany for themanufacture marketing and supply of diesel gensets in India
The Company entered into a license agreement with BioCube Corporation LimitedVancouver for manufacture sale and service of Biodiesel equipment
iv. The expenditure incurred on Research and Development ((Rs in crores)
|Sr. No. ||Particulars ||2015-16 ||2014-15 |
|1 ||Revenue Expenditure ||56.19 ||36.87 |
|2 ||Capital Expenditure ||12.67 ||25.03 |
|3 ||Total R&D expenditure ||68.86 ||61.90 |
|4 ||Total R&D expenditure as% to sales ||2.8% ||2.5% |
C. Foreign exchange earnings and outgoes ((Rs in crores)
|Total Foreign Exchange used & earned ||2015-16 ||2014-15 |
|Used ||87.46 ||115.90 |
|Earned ||236.21 ||211.17 |
TO THE DIRECTORS' REPORT
INFORMATION PURSUANT TO RULE 5 OF THE COMPANIES (APPOINTMENT AND REMUNERATION OFMANAGERIAL PERSONNEL) RULES 2014
|Sr. No. ||Information Required ||Input |
|1 ||The ratio of the remuneration of each Director to the median remuneration of the employees of the Company for the financial year ||Please refer Annexure 'E-1' |
|2 ||The percentage increase in remuneration of each Director Chief Financial Officer Chief Executive Officer Company Secretary or Manager if any in the financial year; ||Please refer Annexure 'E-2' |
|3 ||The percentage increase in the median remuneration of employees in the financial year ||8.48% |
|4 ||The number of permanent employees on the rolls of company ||2427 |
|5 ||The explanation on the relationship between average increase in remuneration and company performance ||The increase in remuneration is not solely based on company performance but also includes various other factors like individual performance vis-a-vis individual KRAs set and achieved industry trends economic situation future growth prospects etc. The Board believes that the increase is in line with industry. |
|6 ||Comparison of the remuneration of the Key Managerial Personnel against the performance of the company ||The increase in remuneration is not solely based on company performance but also includes various other factors like individual performance vis-a-vis individual KRAs set and achieved industry trends economic situation future growth prospects etc. The Board believes that the increase is in line with industry. |
|7 ||Variations in the market capitalisation of the company price earnings ratio as at the closing Market Capitalisation date of the current financial year and previous ~ crs.) financial year and percentage increase over PE ratio decrease in the market quotations of the shares of the company in comparison to the rate at which the company came out with the last public offer in case of listed companies and in case of unlisted companies the variations in the net worth of the company as at the close of the current financial year and previous financial year ||31/03/2016 ||31/03/2015 ||o/o Change |
| || ||3061 ||3960 ||(22.7) |
| || ||21.79 ||27.66 ||(21.2) |
| || ||The Company was formed on 12 January 2009 pursuant to a scheme of demerger. Equity Shares were allotted as per Scheme of Demerger. Since then the Company has not come out with any public offer. Hence information related to % increase or decrease in market quotations over last public offer is not applicable. |
|8 ||Average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration ||Average percentile increase in salaries of managerial personnel: (24.07) percentile |
| || ||Average percentile increase in salaries of non- managerial personnel: 27.47 percentile |
| || ||The salary increases are a function of various factors like individual performance vis-a-vis individual KRAs set and achieved industry trends economic situation future growth prospects etc. besides Company performance. There are no exceptional circumstances for increase in the managerial remuneration. |
|Sr. No. ||Information Required ||Input |
|9 ||Comparison of the each remuneration of the Key Managerial Personnel against the performance of the Company ||The increase in remuneration is not solely based on company performance but also includes various other factors like individual performance vis-a-vis individual KRAs set and achieved industry trends economic situation future growth prospects etc. The Board believes that the increase is in line with industry. |
|10 ||The key parameters for any variable component of remuneration availed by the directors ||Commission is the variable component in the remuneration of the Directors. As per the Nomination and Remuneration Policy of the Company the amount of commission is calculated on the basis of the performance evaluation of the directors. |
|11 ||The ratio of the remuneration of the highest paid director to that of the employees who are not directors but receive remuneration in excess of the highest paid director during the year ||There are no such cases. |
|12 ||Affirmation that the remuneration is as per the remuneration policy of the company. ||The remuneration paid to the Directors is as per the Nomination and Remuneration policy of the company. |
|13 ||Particulars of employees posted and working in a country outside India not being Directors or their relatives drawing more than sixty lakh rupees per financial year or five lakh rupees per month. ||There are no such cases. |
ANNEXURE TO BOARD REPORT-Annexure "E-1"
|Sr. No. ||Name of the Director ||Ratio of remuneration of each director to the median remuneration of the employees of the Company |
|1 ||Atul C Kirloskar ||63.59 |
|2 ||Gautam A. Kulkarni ||59.85 |
|3 ||Nihal G. Kulkarni ||67.52 |
|4 ||Rajendra R. Deshpande ||50.32 |
|5 ||Rahul C. Kirloskar ||3.28 |
|6 ||Pratap G. Pawar ||2.94 |
|7 ||R. Srinivasan ||2.76 |
|8 ||Dr. Naushad D. Forbes* ||NA |
|9 ||M. Lakshminarayan ||0.90 |
|10 ||Mahesh R.Chhabria * ||NA |
|11 ||Gauri Kirloskar * ||NA |
|12 ||Pradeep R. Rathi * ||NA |
|13 ||Vinesh Kumar Jairath * ||NA |
1. Median is computed on the basis of permanent employees on the rolls of the Companyfor the full financial year 2015-16
2. *These Directors were appointed I separated during the year ended 31/03/2016 and31/03/2015. As such the remuneration of these Directors is not considered.
ANNEXURE TO BOARD REPORT- Annexure "E-2"
|Sr. No. ||Name of the Director/KMP ||Designation ||% lncrease/(decrease) in the Remuneration |
|1 ||2 ||3 ||4 |
|1 ||Atul C. Kirloskar ||Director & KMP ||(7.23) |
|2 ||Gautam A. Kulkarni ||Director & KMP ||(11.95) |
|3 ||Nihal G. Kulkarni ||Director & KMP ||43.94 |
|4 ||Rajendra R. Deshpande ||Director & KMP ||27.80 |
|5 ||Rahul C. Kirloskar ||Director ||(86.75) |
|6 ||Pratap G. Pawar ||Director ||(36.36) |
|7 ||R. Srinivasan ||Director ||(37.79) |
|8 ||Dr. Naushad D. Forbes* ||Director ||NA |
|9 ||M. Lakshminarayan ||Director ||(16.19) |
|10 ||Mahesh R. Chhabria* ||Director ||NA |
|11 ||Gauri Kirloskar* ||Director ||NA |
|12 ||Pradeep R. Rathi * ||Director ||NA |
|13 ||T. Vinodkumar ||CFO&KMP ||7.88 |
|14 ||Smita A. Raichurkar ||CS& KMP ||10.89 |
|15 ||Vinesh Kumar Jairath* ||Director ||NA |
* These Directors were appointed I separated during the year ended 31/03/2016 and31/03/2015. As such the remuneration of these Directors is not considered.
ANNEXURE 'F' TO THE DIRECTORS'
REPORT SECRETARIAL AUDIT REPORT
[Pursuant to section 204(1) of the Companies Act 2013 and rule No.9 of the Companies(Appointment and Remuneration Of Managerial Personnel) Rules 2014]
For The Financial Year Ended 31st March 2016
The Members of
KIRLOSKAR OIL ENGINES LIMITED
13 Laxmanrao Kirloskar Road Khadki Pune-411 003.
I have conducted the secretarial audit of the compliance of applicable statutoryprovisions and the adherence to good corporate practices by KIRLOSKAR OIL ENGINESLIMITED hereinafter called the Company. Secretarial Audit was conducted in a mannerthat provided me a reasonable basis for evaluating the corporate conducts/statutorycompliances and expressing my opinion thereon.
Based on my verification of the Company's books papers minute books forms andreturns filed and other records maintained by the company and also the informationprovided by the Company its officers agents and authorized representatives during theconduct of secretarial audit I hereby report that in my opinion the Company has duringthe audit period covering the financial year ended on 31"1March 2016complied with the statutory provisions listed hereunder and also that the Company hasproper Board-processes and compliance-mechanism in place to the extent in the manner andsubject to the reporting made hereinafter:
I have examined the books papers minute books forms and returns filed and otherrecords maintained by the Company for the financial year ended on 31 "1 March2016 according to the provisions of:
(i) The Companies Act 2013 (the Act) and the rules made thereunder;
(ii) The Securities Contracts (Regulation )Act 1956 ('SCRA') and the rules madethereunder;
(iii) The Depositories Act 1996 and the Regulations and Bye-laws framed thereunder;
(iv) Foreign Exchange Management Act 1999 and the rules and regulations madethereunder to the extent of Overseas Direct Investment. There was no incidence of Foreigndirect Investment and External Commercial borrowing;
(v) The following Regulations and Guidelines prescribed under the Securities andExchange Board of India Act 1992 ('SEBIAct'):-
(a) The Securities and Exchange Board of India (Substantial Acquisition of Shares andTakeovers) Regulations 2011;
(b) The Securities and Exchange Board of India (Prohibition of Insider Trading)Regulations 1992 and SEBI (Prohibition of Insider Trading) Regulations 2015;
(c) The Securities and Exchange Board of India (Issue of Capital and DisclosureRequirements) Regulations 2009;-
(d) The Securities and Exchange Board of India (Share Based Employee Benefits)Regulations 2014; [No incidence during the audit period hence not applicable]
(e) The Securities and Exchange Board of India (Issue and Listing of Debt Securities)Regulations 2008; [No incidence during the audit period hence not applicable]
(f) The Securities and Exchange Board of India (Registrars to Issue and Share TransferAgents) Regulations 1993 regarding the Companies Act and dealing with client;
(g) The Securities and Exchange Board of India (Delisting of Equity Shares)Regulations 2009; [No incidence during the audit period hence not applicable]
(h) The Securities and Exchange Board of India (Buyback of Securities) Regulations1998; [No incidence during the audit period hence not applicable]
(vi) No other law is applicable specifically to the Company.
I have also examined compliance with the applicable clauses of the following:
(i) Secretarial Standards issued by The Institute of Company Secretaries of India[notified w.e.f. 181 July 2015].
(ii) The Listing Agreement prevalent up to 30 November 2015 and the New ListingAgreement under SEBI [(Listing Obligations and Disclosure Requirements) Regulations 2015(Listing Regulations) w.e.f. 181 December 2015 entered into by the Companywith BSE Ltd. and NSE Ltd;
During the period under review the Company has complied with the provisions of the ActRules Regulations Guidelines Standards etc. mentioned above.
I further report that
The Board of Directors of the Company is duly constituted with proper balance ofExecutive Directors Non-Executive Directors and Independent Directors. The changes in thecomposition of the Board of Directors that took place during the period under review werecarried out in compliance with the provisions of the Act.
Adequate notice is given to all directors to schedule the Board Meetings agenda anddetailed notes on agenda were sent at least seven days in advance and a system exists forseeking and obtaining further information and clarifications on the agenda items beforethe meeting and for meaningful participation at the meeting.
All the decisions in the Board meeting were taken unanimously during the audit period.
I further report that there are adequate systems and processes in the Companycommensurate with the size and operations of the Company to monitor and ensure compliancewith applicable laws rules regulations and guidelines.
I further report that
The petition filed by the Company during the previous audit period u/s 391 to 394 readwith Sections 1 00 to 1 05 of the Companies Act 1956 before the Hon'ble High Court ofjudicature at Bombay for sanction of composite scheme of arrangement and amalgamationbetween Kirloskar Brothers Investments Limited (KBIL- Transferor Company) PneumaticHoldings Limited (PHL- Resulting Company) and Kirloskar Oil Engines Limited(KOEL-Transferee Company) and their respective shareholders and creditors was sanctionedby the Hon'ble High Court during the audit period and implementation thereof was fullycompleted.
| ||Sd/- |
| ||Mahesh J. Risbud |
| ||Practicing Company Secretary |
| ||FCSNo.810 |
| ||CPNo.: 185 |
| ||UCN - S 1981 M H000400 |
|Date : 1 01 h May 2016 || |
|Place: Pune || |