Your Directors present the 98th Annual Report and the Audited financialstatements of the Company for the year ended on March 312018 together with the reports ofthe Auditors and Board thereon.
The financial results of the Company for the year 2017-18 as compared with the previousFinancial Year are as under:
| ||Year ended March 312018 ||Year ended March 31 2017 |
| ||(Amt. in Million ') ||(Amt. in Million ') |
|Revenue from Operations ||19345.63 ||18230.39 |
|Other income ||188.65 ||182.38 |
|Total ||19534.28 ||18412.77 |
|Profit before tax ||923.32 ||532.89 |
|Tax expense ||267.46 ||202.92 |
|Profit for the period ||655.86 ||329.97 |
|Other Comprehensive Income ||9.47 ||(11.45) |
|Surplus in Profit & Loss Account brought forward from previous year ||2015.13 ||1696.61 |
|Available surplus ||2590.00 ||2015.13 |
The Board of Directors have recommended Dividend of 125% ' 2.50 per equity share forthe year 2017-18 (' 1/- per equity share for 2016-17).
OPERATIONS OF THE COMPANY
The revenue from the operations for the year under review is ' 19345.63 million whichis more than 6.12% compared to the previous year.
The Company is focusing on the Oil & Gas market as we see upgradation of existingrefinery plants to BS IV has taken up speed. As a result we have received prestigiousorders from Oil India Ltd. for FM/UL pumps and second order from BPCL Mumbai for LLCpumpset.
As the Goods and Service Tax (GST) roll out took place on July 12017 the transitionto the new tax regime had its expected initial impact on business and with majority ofsmall customers like the Dealers and Retailers from Small Pump Business the servicecentres and the customers from Building & Construction and Industry initiallystruggled to align their business processes with the new discipline. Dealers and Retailerstook long to settle with the GST regulatory requirements. Business with contractors andPublic Sector undertakings were also impacted.
During the year the Company has commissioned largest bottom suction pump as areplacement to existing 80 (Eighty) years old make pump & motor at Kolkata MunicipalCorporation.
The prestigious project of ERP Optimization and migration to the SAP S4 HANA platformalong with the required changes in 7 (Seven) major allied systems was driven by the coreteam along with the consultants and delivered on the agreed timelines. The Company wentlive on the new platform on October 9 2017. With this Kirloskar Brothers Limited (KBL)the first engineering equipment Company in India to go-live on the SAP HANA 1610 platform.
During the year on international front our representatives attended ATOMEXPO' 2017business forum for global nuclear industry held recently at Moscow Russia.
As a strategy to focus on the process segment Industry Sector team has put up completefocus on networking with Global Process consultants for seeking approvals for chemical andprocess applications.
Irrigation sector successfully commissioned the Company's largest suspension length(30.3 Meters) vertical turbine pump at HNSS Pump Station in Andhra Pradesh.
In Small Pump Business the sales team continued its focus on the market reach campaignthrough Retailer / Plumber / Mechanic meets Industrial customer visits and seminars.There is significant growth in such focused marketing efforts as compared to previousyear.
Our Company's Sanand plant completed 5 (Five) years on June 17 2017.
During the year Kondhapuri plant was awarded Certificate of Excellence for the"Runner Up Performance in Energy Conservation" under Small Manufacturing UnitCategory for year 2015-16. AECOM India's visit was successful and resulted in approval ofthe entire range of Company's valves for all their projects. A product conformity audit byBureau Veritas was successfully completed for small and medium Butterfly valves atKondhapuri. Kondhapuri plant completed development of larger size valves such as 2400 mmBFV 1400 and 1800 mm turbine inlet valves 1800 mm MDNRV etc. during the year.
Kondhapuri plant participated and got shortlisted in the 12th State LevelAwards for Excellence in Energy Conservation and Management under SME category forFinancial Year 2016-17 held on February 8 2018 at MEDA (Maharashtra Energy DevelopmentAgency - Pune).
The Kirloskarvadi plant continued its growth and registered new highs on almost allparameters. Kirloskarvadi crossed INR 5000 million dispatch till December 2017 thehighest in last 5 (Five) years.
As a part of the drive of National Polio Eradication Programme a Pulse Polio Campaignwas organized for children under the age group of 5 (Five) years on January 28 2018 atKirloskarvadi.
The Company along with other reputed organizations having innovative and progressive HRpractices in the area of Employee Benefits and Health was invited to take part in thepanel discussion on the subject. The Company was highly appreciated by industry forumleaders and it also emphasized Company's commitment to its employees' overall health &wellbeing.
KBL received the prestigious Golden Peacock HR Excellence Award' for the year2017 in Industrial Manufacturing sector from former Chief Justice of India Mr. M. N.Venkatachaliah at the 12th International CSR Conference on February 9 2018 inBengaluru.
KBL received the prestigious India Design Mark award for its Romak Pump AT Pump i-CMPump i-NS Pump and HYPN System.
Recommendation was received from Bureau Veritas for inclusion of Corporate Secretarialfunction for the first time in the scope of ISO 9001:2015 certification on the basis ofrecent surveillance audit. This was a voluntary initiative by Corporate Secretarialfunction to get itself certified for its few identified processes under ISO Certification.
The Company's R&D - Engineered Pumps (CRED) team participated & presented paperin 44th National Conference on Fluid Mechanics and Fluid Power-2017' heldat Amrita University Kollam Kerala from December
14 to 16 2017. The conference provided a platform for researchers academiciansindustrialist from around the globe to explore the vast potential of research andadvancements in the field of Fluid Mechanics and Fluid Power.
During the year KBL was associated as co-sponsor for Pune team Puneri Paltan'in this year's Pro Kabaddi League. The Company was also co-sponsors for one of the eightteams participating in the Maharashtra Kusti Premier League (MKPL) an intra-statewrestling tournament organized by the Ahmednagar District Wrestling Association. This wasa strategic decision taken in pursuit of nurturing local wrestling talent and providingthem an ideal platform to compete with the world's best. More importantly Company'sassociation with a traditional sport like wrestling which enjoys immense popularity amongthe masses could help us expand Company's brand visibility and reach across the ruralsector i.e. the target audience for its Agriculture and Domestic pumps.
There were no material changes and commitments which affect the financial position ofthe Company that has occurred between the end of the Financial Year of the Company towhich the financial statements relate and the date of this report.
1. EXTRACT OF ANNUAL RETURN
Extract of Annual Return in Form MGT-9 as per provisions of Section 134 read withSection 92(3) of the Companies Act 2013 (the Act) is given in Annexure I to this Report.
2. NUMBER OF MEETINGS OF THE BOARD
During the Financial Year under review 4 (Four) Board meetings were held the detailsare appearing in the Corporate Governance Report.
3. DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to Section 134(3)(c) of the Act the Board of Directors report that:
(a) in preparation of the annual accounts the applicable accounting standards havebeen followed;
(b) the directors had selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company at the end of the Financial Year and ofthe profit of the Company for that period;
(c) the directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;
(d) the directors had prepared the annual accounts on a going concern basis; and
(e) the directors had laid down internal financial controls to be followed by theCompany and such internal financial controls are adequate and operating effectively;
(f) the directors had devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems are adequate and operating effectively.
4. INDEPENDENT DIRECTORS' DECLARATION
All Independent Directors of the Company have given declaration under Section 149 (7)of the Act that he / she meets the criteria laid down in Section 149 (6) of the Act.
5. DISCLOSURE REQUIRED UNDER SECTION 134(3)(e)
The Board has adopted a Board Diversity Policy which sets the criterion for appointmentas well as continuance of Directors including Independent Directors at the time ofre-appointment as director in the Company. As per the policy the Board has an optimumcombination of Members with appropriate balance of skill experience background genderand other qualities of directors required for the effective functioning of the Board.
The Nomination and Remuneration Committee recommends remuneration of the Directorssubject to the overall limits set under the Act as outlined in the Remuneration Policy asapproved by the Board. As per the policy the Executive Director is entitled for a fixedsalary other non-monetary benefits etc. and commission based on performance evaluation.In case of Non-Executive Directors apart from receiving sitting fees they are entitledfor commission on the basis of criterion as per the policy.
The Remuneration Policy is given in Annexure II is available on the website of theCompany at http://www.kirloskarpumps.com/investors-investor-information-policies.aspx.
6. REPORT OF AUDITORS
During the Financial Year under review there are no qualifications reservations oradverse remarks or disclaimers made by the Statutory Auditors on the financial statementsof the Company and by the Secretarial Auditor in his Secretarial Audit Report which isannexed herewith as Annexure VIII.
M/s. Sharp & Tannan Associates Chartered Accountants (Firm RegistrationNo.109983W) have been appointed as Statutory Auditors of the Company for a period of 5(Five) years from the conclusion of 97th Annual General Meeting till theconclusion of 102nd Annual General Meeting by the shareholders of the Company.The Statutory Auditors have confirmed their eligibility and necessary certificates asrequired under the Act have been received from them.
Mr. Shyamprasad Limaye Practicing Company Secretary (CP No. 572) has been appointedas Secretarial Auditor of the Company as per Section 204 of the Act for the Financial Year2017-18. Mr. Shyamprasad Limaye has been re-appointed as Secretarial Auditor for theFinancial Year 2018-19.
M/s. Parkhi Limaye & Co. (Firm Registration No. 000191) have been appointed as CostAccountant as per Section 148 of the Act read with applicable rules made thereunder forthe Financial Year 2018-19. Their remuneration is subject to approval by the Members.
7. PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS UNDER SECTION 186
The details of loans guarantees or investments under Section 186 of the Act areavailable under Note No. 5 and 35 (D) of notes to accounts attached to the StandaloneFinancial Statements.
The full particulars are available in the Register maintained under Section 186 of theAct which is available for inspection during business hours on all working days (exceptSaturday and Sunday).
8. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES
All contracts/arrangements/transactions entered by the Company during the FinancialYear 2017-18 with the related parties were in the ordinary course of business and at arm'slength basis except few transactions which are disclosed in Form No. AOC 2 as AnnexureVII. During the year the Company has not entered into contract/arrangement/transactionswith related parties which could be considered material in accordance with the Company'sPolicy on Materiality of Related Party Transactions and Dealing with Related PartyTransactions'. The said policy is uploaded on the website of the Company.
Further we draw your attention to Note No 35 of the Standalone Financial Statements ofthe Company for details of Related Party transactions.
9. CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS ANDOUTGO
Details of energy conservation technology absorption research and development andforeign exchange earnings and outgo as required under Section 134(3) (m) of the Act readwith applicable rules are given in Annexure III to this Report.
10. RISK MANAGEMENT
The Company has in place an Enterprise Risk Management Policy'. The RiskManagement Committee identifies the top risks and prioritises those risks. The progressand review status of those identified risks are presented to the Audit and FinanceCommittee and Board. In the opinion of the Board there are no risks identified that maythreaten the existence of the Company.
11. CORPORATE SOCIAL RESPONSIBILITY REPORT
The Company has developed a Corporate Social Responsibility Policy as per therequirements of the Act and the same is available on the website of the Company.
The Corporate Social Responsibility Report in the required format is given in AnnexureIV.
12. BOARD EVALUATION
The Board has formulated a Board Evaluation Policy for evaluation of individualdirectors as well as the entire Board and individual Committees thereof. The evaluationframework is divided into parameters based on the various performance criteria. Theevaluation for the year ended on March 31 2018 has been completed.
In compliance with the requirements under Regulation 25(3) of Securities and ExchangeBoard of India(Listing Obligations and Disclosure Requirements) Regulations 2015 (SEBIListing Regulations 2015) a meeting of Independent Directors was held on November 112017 primarily to discuss the matters mentioned under Schedule IV of the Act. AllIndependent Directors of the Company attended the same.
13. PERFORMANCE AND FINANCIAL POSITION OF SUBSIDIARIES ASSOCIATES AND JOINT VENTURECOMPANIES
Following are the highlights of performance of subsidiaries associates and jointventure companies and their contribution to the overall performance of the Company duringthe period under report.
i. Karad Projects and Motors Limited
The revenue for the year under review is ' 3270.10 million which is 8.95% more ascompared to the previous year. Revenue constitutes 10.40% of gross consolidated revenue.
ii. The Kolhapur Steel Limited
The revenue for the year under review is ' 448.06 million which is 39.44% more ascompared to the previous year. Revenue constitutes 1.42% of gross consolidated revenue.
iii. Kirloskar Corrocoat Private Limited
The revenue for the year under review is ' 343.30 million which is 19.97% more ascompared to the previous year. Revenue constitutes 1.09% of gross consolidated revenue.
iv. Kirloskar Brothers International B.V. (consolidated)
The revenue for the year under review is ' 8468.16 million which is 7.76% more ascompared to the previous year. Revenue constitutes 26.92% of gross consolidated revenue.
v. Kirloskar Ebara Pumps Limited (Joint Venture)
The revenue for the year under review is ' 1663.10 million which is 2.45% more ascompared to the previous year.Revenue constitutes 5.66% of gross consolidated revenue.
The financial position of the subsidiaries associate and joint venture companies isgiven in AOC-1 elsewhere in the Annual Report.
14. OTHER STATUTORY DISCLOSURES AS REQUIRED UNDER RULE 8(5) OF THE COMPANIES (ACCOUNTS)RULES 2014
(i) Financial summary/highlights are included elsewhere in the report;
(ii) There was no change in the nature of the business during the year under review;
(iii) Details of Directors or Key Managerial Personnel who were appointed or haveresigned during the year ;
- Dr. Rakesh Mohan (DIN 02790744) - Additional Director was appointed by the Boardwith effect from July 28 2017. The Board recommends his appointment as an IndependentDirector at the ensuing Annual General Meeting.
- Ms. Rama S. Kirloskar (DIN 07474724) - Additional Director was appointed by theBoard with effect from July 28 2017. The Board recommends her appointment as aNon-Executive Director at the ensuing Annual General Meeting.
- Mr. Alok Kirloskar (DIN 05324745) - Non - Executive Director of the Company is liableto retire by rotation and being eligible offers himself for re-appointment.
(iv) Companies which have become or ceased to be subsidiaries joint ventures orassociate companies during the year:
During the year Kirloskar Brothers International Zambia Limited' which was asubsidiary company of Kirloskar Brothers International (Pty) Limited was wound up onDecember 20 2017. Kirloskar Brothers International (Pty) Limited acquired the shares inRotaserve Mozambique and entered into joint venture with Viwe Mlenzana to form SPP NezivPumps Solutions.
(v) Details relating to Deposits:
The Company neither accepts nor renews matured deposits since January 2003 and therewere no deposits accepted by the Company as covered under Chapter V of the Act read withRules made thereunder.
(vi) No Significant and material orders were passed by the Regulators or court ortribunals impacting the going concern status and Company's operations in future.
(vii) Details in respect of adequacy of internal financial controls with reference tothe financial statements:
The Company has adequate internal financial control systems in place. The controlsystems are regularly reviewed by the external auditors and their reports are presented tothe Audit and Finance Committee.
The Company has an Internal Audit Charter specifying mission scope of workindependence accountability responsibility and authority of Internal Audit Department.The internal audit reports are reported to Audit and Finance Committee along withmanagement response.
(viii) Other disclosures required under the Act as may be applicable:
- Composition of the Audit and Finance Committee has been disclosed in CorporateGovernance Report.
- Establishment of vigil mechanism: The Company has already in place a WhistleBlower Policy' as a vigil mechanism since 2008. The details of the same are reported inCorporate Governance Report.
- Disclosures as required under Section 197(12) of the Act read with applicable rulesand details as per Rule 5(2) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 are given in Annexure V & Annexure VI.
15. DISCLOSURE AS PER SECRETARIAL STANDARD:
The Board confirms the compliance with the applicable Secretarial Standards (SS-1) forthe year under review.
16. CASH FLOW
Cash flow statement for the year ended on March 312018 is attached to the BalanceSheet.
SAFETY HEALTH AND ENVIRONMENT Safety and Health
All manufacturing plants are certified for Occupational Health and SafetyAssessment Series (OHSAS) standards ISO 18001 and Environment Management System (ISO14001) and SA8000. Periodic internal audits of all our manufacturing units are beingconducted to ensure legal compliance OHSAS 18001 ISO 14001 requirements.
Apart from compliance external or internal audits all the manufacturing unitsare internally audited by cross-plant Safety team for verification of EHS compliances andstandard industrial safe practices.
New initiative has been introduced to implement BBS system at manufacturingplant level phase wise. As a part of first phase BBS check list portal is introduced andstaff employees are checking the safety compliance and report in the system.Implementation of phase II is under consideration for some plants.
Almost 800 incidents have been logged in the system last year in Incidenttracking system against 500 incidents logged previous year that is 60% more compared tolast year. It indicates there is increase in safety awareness. 357 tasks have beenimplemented and 329 task are under implementation. Its helping to reduce unsafe acts andconditions at the workplace.
Measuring Plant safety performance system is introduced considering leadingindicators and lagging indicators. Plant heads have been requested to add one slide onplant safety performance in Plant MIS.
Safety Assessment from third party is initiated for manufacturing plants andsubsidiaries.
System Monthly safety checking by project site personnel which is alsodeclaration of safety compliance from the project site for Company's employee isinitiated. Monthly MIS from live projects is sent from project In-charges to corporatesafety is established.
Environment and Energy
Use of green strategies and optimal use of resources in manufacturing to ensure minimalenvironmental impact is ingrained in our culture. All our manufacturing plants follow theprinciples of conservation. The Company has upgraded Environment Management System tolatest version (ISO 14001: 2015) at Kirloskarvadi Dewas Sanand Kaniyur and certifiedunder matrix certification. The Company's Corporate Environment Health & Safetypolicy details our approach towards the management of energy water preservation ofnatural resources and environment.
The Company makes conscious and serious attempts to conserve fossil fuels byincreasing our share of renewable energy. A dedicated ENCON team helps us manage energyat manufacturing facilities. The Company monitors our direct and indirect energyconsumption which is reported in the Company's annual sustainability report. Every yearGroup Level Energy Conservation (ENCON) competition amongst manufacturing plants toencourage them to implement energy conservation projects.
KBL has initiated many actions to reduce energy consumption and conserve energy whichincludes installation of Roof Top Solar Plants at Dewas and Sanand manufacturingfacilities installation of LED/ Induction lamps installing Solar water heating systemfor process application.
Pursuant to SEBI Listing Regulations 2015 Management Discussion and Analysis ReportReport on Corporate Governance Auditors' Certificate on Corporate Governance Disclosureof unclaimed shares and the declaration by the Chairman and Managing Director regardingaffirmations for compliance with the Company's Code of Conduct are annexed to this report.
EMPLOYEE STOCK OPTION SCHEME (ESOS)
As you are aware during the year 2007-08 the Company launched the Employees'"Share a Vision" Stock Option Scheme 2007 (ESOS-2007).
The Management has formulated under ESOS - 2007 a proposal of providing stock optionsat ' 2/- per option to award employees for their outstanding exemplary performance ingetting sustainable results.
During the year no allotment was made under ESOS -2007 scheme.
DISCLOSURE UNDER THE "SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTIONPROHIBITION AND REDRESSAL) ACT 2013."
In terms of Section 22 of the above mentioned Act read with Sexual Harassment of Womenat Workplace (Prevention Prohibition and Redressal) Rules 2013 we report as follows forthe year ended on March 312018:
|1 No. of complaints received in the year ||Nil |
|2 No. of complaints disposed off in the year ||Nil |
|3 Cases pending for more than 90 days ||Nil |
|4 No. of workshops and awareness programmes conducted in the year ||16 |
|5 Nature of action by employer or District Officer if any ||NA |
Your Directors wish to place on record their appreciation of the unstinted support andco-operation given by banks and financial institutions. Your Directors would further liketo record their appreciation of the efforts by the employees of the Company.
For and on behalf of the Board of Directors
| ||Sanjay C. Kirloskar |
| ||Chairman & Managing Director |
|Pune: May 112018 ||DIN 00007885 |