TO THE MEMBERS OF KIRLOSKAR OIL ENGINES LIMITED
The Directors are pleased to present the 9th Annual Report together with the AuditedStatement of Accounts for the year ended 31 March 2018.
FINANCIAL RESULTS (STANDALONE)
(Rs in Crores)
|Particulars ||2017-18 ||2016-17 |
|Total Income ||2956.55 ||2958.22 |
|Profit before exceptional items and tax ||222.48 ||252.30 |
|Exceptional Items ||- ||- |
|Profit before tax ||222.48 ||252.30 |
|Tax Expense (Current & Deferred Tax) ||72.37 ||78.68 |
|Net Profit for the Period ||150.11 ||173.62 |
|Other Comprehensive Income ||1.06 ||(0.58) |
|Total Comprehensive Income for the year net of tax ||151.17 ||173.04 |
|Profit Brought Forward ||979.20 ||806.15 |
|Profit Available for Appropriation ||1130.37 ||979.20 |
|Transfer to General Reserve ||- ||- |
|Dividend and dividend distribution tax ||130.54 ||- |
|Balance of the Profit carried forward ||999.83 ||979.20 |
COMPANY'S FINANCIAL PERFORMANCE
Despite an extremely challenging macroeconomic environment your Company posted itshighest net sales of Rs 2804 crores as compared to the previous fiscal of Rs 2614 crores.An increase of 7%. Profit from operations (before exceptional items) was Rs 222 crores asagainst Rs 252 crores in the previous year. The Industrial Promotion Subsidy (IPS) whichthe Company was availing of for operations in Kagal came to an end on 31 March 2017. Inthe previous year the amount availed was approximately Rs 36 crores. The Profit After Taxwas Rs 150 crores as against Rs 174 crores in the previous year.
For the year under review the Directors have declared an Interim Dividend of 125% (`2.50/- per share) and also recommended a dividend of 125% (` 2.50/- per share) for theyear (PY Final Dividend 250% Rs 5 per share). Total dividend payout for the yearwill be Rs 72.30 crores including payment of Rs 14.79 crores as dividend distributiontax.
During the year under review the Company entered into a Share Purchase Agreement foracquisition of 100% equity shares of La-Gajjar Machineries Private Limited (LGM) aleading submersible and mono block pump manufacturer based in Ahmedabad Gujarat Indiawith established brands "Varuna" and "Raindrop" and a pan-Indiadistribution setup. This is a strategic acquisition made in order to consolidate theCompany's position in the diesel and electric pump segment. The Company is confident thatsynergies will play out in the future and the Company will attain leadership position inthe complete pump segment.
As part of the Share Purchase Agreement signed on 1 August 2017 the Company acquired76% of equity shares of LGM being the first tranche with a clear understanding that thebalance 24% will be acquired by the Company over a 5 year period. LGM has become asubsidiary of the Company with effect from 1 August 2017.
In the first eight months of operation the focus has been to establish processes andpolicies in line with the Company set direction and integrate operations wherever neededto extract synergies going forward.
AMENDMENT TO THE MAIN OBJECT CLAUSE OF MEMORANDUM OF ASSOCIATION
During the year under review the Company altered the Main Object Clause of itsMemorandum of Association to include Financial Services' business on its own orthrough a subsidiary established for the purpose with approval of members of the Companyby way of postal ballot. The Company has promoted and incorporated a wholly ownedsubsidiary namely Kirloskar Capital Limited (KCL) on 20 April 2018 for the purpose ofcommencement of financial service business.
SUBSIDIARY COMPANY AND CONSOLIDATED FINANCIAL STATEMENTS
As on 31 March 2018 the Company had the following two subsidiaries:
1. KOEL Americas Corp. USA (KOEL Americas)
2. La-Gajjar Machineries Private Limited (LGM)
The additional sales revenue from KOEL Americas Corp. USA (wholly owned subsidiary) forthe fiscal ended 31 March 2018 was $ 3730142 (` 24.06 crores). Profit from operationsbefore Tax was $ 151319 (` 0.98 crores). The Profit after Tax was $ 112222 (` 0.73crores). The additional sales revenue from La-Gajjar Machineries Private Limited(subsidiary) for the period from 1 August 2017 to 31 March 2018 was Rs 214 croresLoss from operations before Tax was Rs 11 crores. The Net Loss was Rs 8 crores.
The consolidated financial statements of the Company and its two subsidiaries preparedin accordance with IND-AS 110 issued by Institute of Chartered Accountants of Indiaforms part of this Annual Report. A statement containing the salient features of thefinancial statements of the subsidiary companies is attached to the Financial Statementsof the Company in Form AOC-1.
Pursuant to the provisions of Section 136 of the Companies Act 2013 the financialstatements along with relevant documents of the Company and its subsidiaries are availableon the Company's website.
The annual accounts of the subsidiaries and related detailed information will be keptfor inspection by any shareholders at the Registered Office of the Company and will alsobe made available to the shareholders on demand at any point of time.
a) Changes in Composition of the Board of Directors:
Mr. Mahesh R. Chhabria was appointed as Managing Director of KirloskarIndustries Limited a Promoter Group Company with effect from 4 July 2017. Consequent tothis he ceased to be Independent Director of the Company but continued to beNon-Independent Director of the Company with effect from 4 July 2017.
On account of ill health Mr. Gautam A. Kulkarni Executive Vice Chairman of theCompany tendered his resignation effective 14 September 2017. It was unfortunate that on20 September 2017 he succumbed to his illness. The Board in its meeting dated 13 October2017 placed on record their appreciation for the guidance support and contributionprovided by him during his tenure as Director of the Company.
The Board of Directors of the Company in its meeting held on 19 January2018 reappointed Mr. Rajendra R. Deshpande as the Whole Time Director with designation asJoint Managing Director for a term of 2 years with effect from 29 April 2018. A proposalfor his re-appointment as the Joint Managing Director and remuneration payable to him isbeing placed before the Members of the Company for their approval at the ensuing AnnualGeneral Meeting.
Mr. Mahesh R. Chhabria retires by rotation at the ensuing Annual General Meetingand being eligible offers himself for re-appointment.
The brief resumes and other details relating to the Directors who are proposed to beappointed / 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:
Mr. Rajendra R. Deshpande Joint Managing Director was re-appointed as Key ManagerialPersonnel of the Company with effect from 29 April 2018.
c) Declarations from the Independent Directors:
The Company has received declarations from all the Independent Directors of the Companyconfirming that they meet the criteria of independence as prescribed under Section 149 (6)of the Companies Act 2013 including amendment thereof and Regulation 16(1)(b) of SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015.
d) Board Evaluation:
In continuation of the process laid down in the previous year members of the 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 organizationstrategy including Long Range Plan and Annual Operating Plan inorganic growth opportunityevaluation Enterprise Risk Management etc. Using appropriate criteria the performance ofthe various Committees was separately evaluated by the Board.
In a separate meeting of Independent Directors performance of non-independentdirectors performance of the Board as a whole and performance of the Chairman takinginto account the views of executive directors and non-executive directors were evaluated.
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.
The Chairman of the Board and the Chairman of Nomination and Remuneration Committee hadone-on-one meetings with the Directors. These meetings were intended to obtain Directors'inputs on effectiveness of the Board/Committee processes.
e) Nomination and Remuneration Policy:
The Board of Directors on the recommendation of the Nomination & RemunerationCommittee has adopted a policy that lays guidelines for selection and appointment ofDirectors Key Managerial Personnel and Senior Management personnel together with theirremuneration. The Nomination and Remuneration Policy is available on Company's website.
f) Number of meetings of the Board :
During period under review eight (8) 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 the Report on Corporate Governance.
PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS
During the year under review the Company has invested in equity shares of La-GajjarMachineries Private Limited. The details of which are given in the Financial Statements.The Company has not granted any Loans and Guarantees covered under Section 186 of theCompanies Act 2013.
PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES
All related party transactions that were entered into during the Financial Year 2017-18were on an arm's length basis and were in the ordinary course of business. Hence thereare no transactions to be reported in Form AOC-2. None of the related party transactionsentered into by the Company were materially significant warranting members' approvalunder SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015. AllRelated Party Transactions are routinely placed before the Audit Committee for approvalafter being duly 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 IND-AS 24 for transactions with related partiesare provided in the Financial Statements of the Company.
RISK MANAGEMENT FRAMEWORK
Risk management is a continuous process within the organization which works all acrossfunctions and businesses. The process facilitates identification evaluation mitigationand review of risks and opportunities both at business and enterprise level which mayaffect achievement of objectives.
The Internal Audit Department facilitates the risk management process by working withthe businesses functions and senior management to address major types of risks which arestrategic people environmental economic and operational in nature in a structured andfocused manner.
Detailed mitigations are prepared post identification of risk which are aligned to thebusiness goals and enterprise vision both short and long term. The business heads withthe help of Internal Audit Department reviews the risks with respect to the likelihood andimpact in a structured forum to ensure bottom up approach is followed in addition to a topdown approach.
The enterprise risks and mitigation plans are reviewed by the Audit Committee and Boardperiodically.
INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO THE FINANCIAL STATEMENTS
The Company's Internal Control Framework is Commensurate with the size and nature ofits operations.
Details of internal financial control and its adequacy are Analysis Report which formspart of this Report.
CORPORATE SOCIAL RESPONSIBILITY
The Company has always believed in working for the betterment and upliftment ofsociety. Corporate Social Responsibility (CSR) has been practiced and engrained over theyears in the Company. The focus areas under CSR have remained consistent over the yearsand include: Health Education and Environment.
The Company strongly believes in Enriching Lives' of the people surrounding thecommunities in which it operates.
The Composition of CSR Committee of the Board and Report on CSR activities is annexedherewith as Annexure A.
VIGIL MECHANISM / WHISTLE BLOWER POLICY
The Company has a Vigil Mechanism / 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.
EXTRACT OF ANNUAL RETURN
The details forming part of the extract of the Annual Return in form MGT 9 is annexedherewith as Annexure B to this report.
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 C 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 D 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 HARRASSMENT
The Company has in place a Policy for prevention of sexual harassment at workplace.This inter alia provides a mechanism for the resolution settlement or prosecution of actsor instances of Sexual Harassment at work and ensures that all employees are treated withrespect and dignity. There were no complaints filed / pending with the Company during theyear.
During Financial Year 2017-18:
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.
d. The Company is in compliance with applicable Secretarial Standards.
a) Statutory Auditors
The members of the Company in its meeting held on 5 August 2016 re-appointed M/s. P.G. Bhagwat Chartered Accountants Pune (Firm Registration Number 101118W) as StatutoryAuditors of the Company for a second term of 5 consecutive years to hold office fromAnnual General Meeting (AGM) held on 5 August 2016 till the conclusion of the AnnualGeneral Meeting to be held in the year 2021 subject to the ratification by themembers atevery AGM.
Pursuant to the first proviso to Section 139 of the Companies Act 2013 theappointment of the Statutory Auditors was required to be placed for ratification at everyAnnual General Meeting. The said proviso has been omitted by MCA vide its Notificationdated 7 May 2018 with immediate effect.
The Company has received from them the requisite certificate pursuant to Section 139of the Companies Act 2013 for Financial Year 2018-19.
There are no adverse remarks / qualifications of Statutory Auditors on financialstatements for the year ended 31 March 2018.
b) Cost Auditors
The Company has appointed M/s. Parkhi Limaye & Co. as Cost Auditors of the Companyfor the Financial Year 2018-19 under section 148 of the Companies Act 2013 and rulesthereof.
c) Secretarial Audit Report
The Company had appointed Mr. M. J. Risbud Practicing Company Secretary to conductSecretarial Audit of the Company under section 204 of the Companies Act 2013 and therules thereof. The Secretarial Audit Report is annexed herewith as Annexure E.
There are no adverse remarks / qualifications of Secretarial Auditors in theSecretarial Audit Report for the year ended 31 March 2018.
MANAGEMENT DISCUSSION & ANALYSIS AND REPORT ON CORPORATE GOVERNANCE
The Management Discussion and Analysis and the Report on Corporate Governance asrequired under SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015forms part of this Annual report.
A Certificate from the Statutory Auditors of the Company regarding compliance withgovernance as required under SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 also forms part of this Annual Report.
BUSINESS RESPONSIBILITY REPORT
Business Responsibility Report as required under Regulation 34(2)(f) of SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 forms part of this AnnualReport.
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 2018 and of the profit of the Company for the year ended on thatdate;
c) they have taken proper and sufficientcare for the maintenance of adequate accountingrecords in accordance with the provisions of the Companies Act 2013 for safeguardingassets of the Company and for preventing and detecting fraud and other irregularities;
d) they have prepared the annual accounts on a going concern basis;
e) they have laid down internal financial controls to be followed by the Company 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 ofapplicable laws and regulations. Actual results may differ materially from those eitherexpressed or implied.
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.
| ||For and on behalf of the Board of Directors |
| ||Sd/- |
| ||ATUL C. KIRLOSKAR |
| ||EXECUTIVE CHAIRMAN |
|Date: 18 May 2018 || |
|Place: Pune || |