pneumatic holding ltd Directors report

To the Members,

Your Directors have pleasure in presenting their Second Annual Report together with the Audited Statement of Accounts for the year ending 31 March 2016.

LISTING ON STOCK EXCHANGES

Pursuant to the Composite Scheme of Arrangement and Amalgamation between Kirloskar Brothers Investments Limited (KBIL) and the Company and Kirloskar Oil Engines Limited (KOEL) and their respective Shareholders and Creditors (the "Composite Scheme"), the Company issued and allotted fully paid 52,88,718 equity shares of Rs. 10/- each in the ratio of 1:1 to the shareholders of Kirloskar Brothers Investments Limited on 14 July 2015.

The Securities and Exchange Board of India vide its letter dated 9 September 2015 granted the necessary relaxation under Rule 19(2)(b) of Securities Contracts (Regulation) Rules, 1957, for the listing of the aforesaid equity shares of the Company and consequently trading commenced with effect from 18 September 2015, on BSE Limited and National Stock Exchange of India Limited.

FINANCIAL PERFORMANCE

The Companys financial performance for the year under review alongwith previous year figures is given hereunder:

		[ Rs. in lakhs]
Particulars	Year ended 31 March 2016	Year ended 31 March 2015
Total Income	1,231.46	7.51
Total Expenditure	517.00	87.97
Profit before exceptional items and taxation	714.46	(80.46)
Provision for tax (including Deferred Tax)	(37.44)	(24.16)
Net Profit	751.90	(56.30)
Balance of Profit / (Loss) from previous year	(56.30)	-
Add: Transfer in terms of the Composite Scheme	5,938.27	-
Balance available for appropriation	6,633.87	(56.30)
Appropriations:
Interim Dividend	475.98	-
Proposed Dividend	-	-
Tax on proposed dividend	-	-
Transfer to General Reserve	-	-
Balance carried to Balance Sheet	6,157.89	(56.30)

DIVIDEND

Interim Dividend of 90 % (Rs. 9/- per equity share of Rs. 10/- each) was paid in the month of March 2016. Your Directors do not recommend Final Dividend for the year 2015-16.

MANAGEMENT DISCUSSION AND ANALYSIS

The main object of the Company is to make strategic investments in the Kirloskar Group Companies. The Company is categorized as a Core Investment Company Non Banking Financial Company (CIC-NBFC) as per guidelines issued by the Reserve Bank of India and the investment pattern of the Company also complies with the requirement to continue to qualify as a CIC-NBFC.

COMPANY PERFORMANCE

During the year, your Company earned total income of Rs. 12.31 Crores as compared Rs. 0.07 Crores in previous year and gained a profit of Rs. 7.52 Crores as compared to loss of Rs. 0.56 Crores in previous year.

In the year under review, the Company received dividend of Rs. 3.50 Crores declared by the investee companies for the financial year 2014 -15. The Company also received interim dividend of Rs. 4.90 Crores declared by the investee companies in the year 2015 -16, which their respective Boards have considered as final dividend.

OPERATIONS OF THE COMPANY

The main operations of the Company are that of investment and majority of the investments of the Company are in the nature of strategic investments in Kirloskar Group Companies. The Company acquired equity shares and other businesses through the Composite Scheme of Arrangement and Amalgamation. Consequently, this is the first year of operations. The main source of income for the Company is in the form of dividends. The Company has received dividend income of Rs. 8.39 Crores during the year. The Company is also engaged in Vehicle Leasing business. However no new lease Agreements were entered into during the year under review.

HUMAN RESOURCES

As on 31 March 2016, the Company has 9 employees on its roll, including the Executive Director.

CONCERNS AND THREATS

• Fluctuations in the securities market and global economic scenario, may pose a risk of devaluation of the investments made by the Company.

• Main source of income for the Company is dividend from its Subsidiary Company.

• The risks and concerns associated with the businesses/operations of these investee companies, which may impact the performance of these companies, could result in variation in dividends declared by these companies.

• Risk related to recovery of cost of residual value after expiry of operating lease period.

• Total damage risk of the vehicle given on lease.

• Pre-mature termination of operating lease Agreement by lessee.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has adequate internal control systems to ensure operational efficiency, accuracy and promptness in financial reporting and compliance of various laws and regulations.

The internal control system is supported by the internal audit process. An Internal Auditor has been appointed for this purpose. The Audit Committee of the Board reviews the Internal Audit Report and the adequacy and effectiveness of internal controls periodically.

CAUTIONARY STATEMENT

Statements in this Report, particularly those which relate to Management Discussion and Analysis, describing the Companys objectives, projections, estimates and expectations may constitute "forward looking statements" within the meaning of applicable laws and regulations. Actual results might differ materially from those either expressed or implied.

LISTING FEES

The annual listing fees for the year under review have been paid to BSE Limited and National Stock Exchange of India Limited, where your Companys shares are listed.

SUBSIDIARY COMPANIES AND CONSOLIDATED FINANCIAL STATEMENTS

As on 31 March 2016, the Company has following subsidiaries:

1. Kirloskar Pneumatic Company Limited (KPC)

2. Kirloskar RoadRailer Limited (Wholly owned Subsidiary of KPC) Kirloskar Chillers Private Limited is an Associate Company of KPC.

The Board presents Audited Consolidated Financial Statements incorporating the Consolidated Audited Financial Statements of KPC and as prepared in compliance with the Accounting Standards and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, (the " Regulations").

Pursuant to Rule 5 of Companies (Accounts) Rules, 2014, the Statement containing the salient feature of the Financial Statement of a Companys subsidiary and associate companies under the first proviso to Sub-Section (3) of Section 129 of the

Companies Act, 2013 ("the Act") in Form AOC-1 is required to be enclosed to the Financial Statements.

The Consolidated Financial Statements prepared as per applicable provisions and duly audited by Statutory Auditors, are presented elsewhere in this Annual Report along with Form AOC-1.

Further, the Company undertakes that the Annual Accounts of the Subsidiary Companies and the related detailed information shall be made available to the shareholders on demand, at any point of time. The Annual Accounts of the Subsidiary Companies shall also be kept open for inspection by any shareholder at the Registered Office of the Company.

Brief highlights of businesses of subsidiary company

Kirloskar Pneumatic Company Limited (KPC)

KPC is in the business of Compression Products/Systems and Transmission Products having its manufacturing locations at Hadapsar, Saswad in Pune and Nashik.

The revenue of the KPC for the year 2015-16 is increased to Rs. 529.98 Crores from Rs. 460.14 Crores in the last year and the net profit after taxes of KPC increased from Rs. 22.58 Crores to Rs. 36.38 Crores.

The Board of Directors of KPC has declared an interim dividend of Rs. 7/- (70 %) per equity share for the Financial Year 2015-16,which is considered as final dividend.

During the year under review, KPC has been appreciated for ENCON efforts by:

• 1st prize at 9th State Level EC Award to Hadapsar plant for Financial Year 2014-15 from MEDA (Maharashtra Energy Development Agency);

• National award by CII for Energy Efficient unit to Hadapsar plant; and

• Certificate of Merit to Saswad plant in National Energy Conservation Award 2015 competition by Govt. of India.

During the year under review, KPC has received:

• Gold Award Trophy in Quality Improvement Success Stories in Competition organized by Quality Circle Forum India.

• Awards in the 29th National Convention on Quality Concepts - NCQC 2015 organised by QCFI.

- 2 Nos. "Par Excellence Award Trophy".

- 2 Nos. "Excellence Award Trophy" "Distinguish Award Trophy".

"Certificate of Merit" in recognition of its significant progress in Total Quality Management in Ravi Kirloskar Quality Prize for Business Excellence 2014-15.

• "Supplier of EHS Excellence Award" received from GE Oil & Gas for the excellent and consistent performance in EHS practices for the last 4 years.

Kirloskar RoadRailer Limited (Wholly Owned Subsidiary of KPC)

Kirloskar RoadRailer Limited is set up for providing RoadRailer Services and KPC expects that the RoadRailer services will commence from the current financial year.

PARTICULARS OF INFORMATION FORMING PART OF THE BOARDS REPORT PURSUANT TO SECTION 134 OF THE COMPANIES ACT, 2013, RULE 8 OF THE COMPANIES (ACCOUNTS) RULES 2014 AND RULE 5 OF THE COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014

EXTRACT OF ANNUAL RETURN

The details forming part of the extract of the Annual Return in Form MGT- 9, is annexed herewith as ‘Annexure I to this Report.

NUMBER OF MEETINGS OF THE BOARD

During the year under review, six Board Meetings were convened and held. The details of which are given in the Corporate Governance Report. The intervening gap between the Meetings was within the period prescribed under the Act.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to the requirements of Section 134(5) of the Act, in respect of Directors Responsibility Statement, your Directors state that:

a) in the preparation of the Annual Financial Statements for the year ended 31 March 2016, the applicable accounting standards have been followed along with the proper explanation relating to material departures;

b) accounting policies as mentioned in Part - B to the Financial Statements have been selected and applied consistently. Further judgments and estimates have been made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31 March 2016 and of the profit of the Company for the year ended on that date;

c) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

d) the Annual Financial Statements have been prepared on a going concern basis;

e) proper internal financial controls were in place and that the financial controls were adequate and were operating effectively; and

f) proper systems to ensure compliance with the provisions of all applicable laws were in place and were adequate and operating effectively.

STATEMENT ON DECLARATION BY THE INDEPENDENT DIRECTORS

All Independent Directors have given declarations that they meet the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013 and Regulation 16(1) (b) of the Listing Regulations, 2015.

COMPANYS POLICY ON DIRECTORS APPOINTMENT AND REMUNERATION

The Company constituted a Nomination and Remuneration Committee. The Board has, on the recommendation of the Nomination and Remuneration Committee framed a policy for selection and appointment of Directors, Key Managerial Personnel (KMP) and Senior Management Personnel and their remuneration. The policy is annexed as ‘Annexure II to this Report.

AUDITORS

a. Statutory Auditors

M/s. P. G. Bhagwat, Chartered Accountants (Firms Registration No. 101118W), Pune, Statutory Auditors are appointed as Statutory Auditors of the Company from the conclusion of First Annual General Meeting (AGM) held on 29 June 2015 till the conclusion of Sixth Annual General Meeting of the Company to be held in Financial Year ended 2019-20, subject to ratification by members annually from this Annual General Meeting. The requisite certificate as per Section 139 of the Companies Act, 2013, has been received by the Company, about their eligibility to continue as Statutory Auditor of the Company.

b. Secretarial Auditor

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed M/s. Kanj & Associates, Practicing Company Secretaries, Pune, to undertake the Secretarial Audit of the Company. The Report of the Secretarial Audit is annexed herewith as ‘Annexure III.

EXPLANATION ON COMMENTS ON STATUTORY AUDITORS AND SECRETARIAL AUDIT REPORT

There are no qualifications, reservations or adverse remarks or disclaimers made by M/s. P. G. Bhagwat, Statutory Auditors, in their Audit Report and by M/s. Kanj & Associates, Practicing Company Secretaries, Pune, in their Secretarial Audit Report.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENT UNDER SECTION 186 OF THE COMPANIES ACT, 2013

Your Company has not given any loan or guarantee or security or made any investment during the year.

PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES REFERRED TO IN SUB-SECTION (1) OF SECTION 188 OF THE COMPANIES ACT, 2013

Pursuant to the provisions of Section 134 of the Companies Act, 2013, read with Rule 8 (2) of the Companies (Accounts) Rules, 2014, the terms of contracts or arrangements entered into by the Company with Related Parties have been done at arms length and are in the ordinary course of business. Hence, no particulars are being provided in Form AOC-2. Related Party disclosures as per AS -18 have been provided in Note No. C-2 to the Financial Statements.

STATE OF COMPANYS AFFAIRS

Discussion on state of Companys affairs has been covered in the Management Discussion and Analysis.

AMOUNTS PROPOSED TO BE CARRIED TO RESERVES

Particulars of the amounts proposed to be carried to reserves have been covered as part of the financial performance of the Company.

MATERIAL CHANGES AND COMMITMENTS BETWEEN THE DATE OF THE BALANCE SHEET AND THE DATE OF REPORT

There have been no material changes and commitments, affecting the financial position of the Company which have occurred between the end of the Financial Year of the Company to which the Financial Statements relate and the date of the report.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

A. Conservation of energy and Technology Absorption

The Company has no particulars to report regarding conservation of energy, technology absorption as required under Section 134 (3) (m) of the Companies Act, 2013, read with Rules thereunder.

B. Foreign exchange earnings and Outgo

Sr. No.	Particulars	Amount in Rs.
i	Foreign Exchange earned in terms of actual inflows during the year	33,53,011
ii	Foreign Exchange outgo during the year in terms of actual outflows	Nil

RISK MANAGEMENT POLICY

The Company has in place a mechanism to identify, assess, monitor and mitigate various risks to key business objectives. Major risks identified are systematically addressed through mitigating actions on a continuing basis. These are discussed at the meetings of the Audit Committee and the Board of Directors of the Company.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The provisions of Section 135 of the Companies Act, 2013, in respect of Corporate Social Responsibility are not applicable to the Company.

BOARD EVALUATION

Pursuant to provisions of the Companies Act, 2013, the Board has carried out performance evaluation of its own, its Committees and individual Directors.

PERFORMANCE AND FINANCIAL POSITION OF EACH OF THE SUBSIDIARIES, ASSOCIATES AND JOINT VENTURE COMPANIES

Name and Registered Office of the Subsidiary Company	% Holding	Particulars	Amount
			(Rs. in lakhs)
Kirloskar Pneumatic Company Limited	54.45	Total Income	52,997.80
Hadapsar Industrial Estate, Pune 411 013.		Total Expenditure	47,833.32
		Profit / (Loss) before exceptional items and taxation	5,164.48
		Profit / (Loss) before taxation	5,164.48
		Provision for tax (including Deferred Tax)	1,526.60
		Net Profit / (Loss)	3,637.88
		Balance of Profit / (Loss) from previous year	1,993.97
		Less: Transfer to General Reserve	2700.00
		Less: Interim Dividend	899.10
		Less: Proposed Dividend	-
		Less : Dividend Distribution Tax	182.28
		Balance carried to Balance Sheet	1,850.47
Kirloskar RoadRailer Limited Hadapsar Industrial Estate, Pune 411 013.	100% subsidiary of Kirloskar Pneumatic Company Limited	Total Income	0.00
		Total Expenditure	16.55
		Profit / (Loss) before exceptional items and taxation	(16.55)
		Profit / (Loss) before taxation	(16.55)
		Provision for tax (including Deferred Tax)	0.00
		Net Profit / (Loss)	(16.55)
		Balance of Profit / (Loss) from previous year	(27.41)
		Less: Proposed Dividend	0.00
		Less : Dividend Distribution Tax	0.00
		Balance carried to Balance Sheet	(43.96)

CHANGE IN THE NATURE OF BUSINESS, IF ANY

Not applicable, as this is the first year of operations.

DETAILS OF DIRECTORS OR KEY MANAGERIAL PERSONNEL WHO WERE APPOINTED OR HAVE RESIGNED DURING THE YEAR

Directors appointed during the year

Name of Director	Designation	Term of appointment
Mr. Atul C. Kirloskar	Director	First Director appointed at the Annual General Meeting, subject to retirement by rotation
Mr. Anil C. Kulkarni	Director	First Director appointed at the Annual General Meeting, subject to retirement by rotation
Mr. Anil N. Alawani	Director	First Director appointed at the Annual General Meeting, subject to retirement by rotation
Mr. Sunil Shah Singh	Independent Director	First Director appointed as Independent Director at the Annual General Meeting for five consecutive years commencing from 29 June 2015 up to 28 June 2020
Mr. Vijay K. Bajhal	Independent Director	Additional Director appointed as Independent Director at the Annual General Meeting for one year commencing from 29 June 2015 up to 28 June 2016
Mrs. Savita P. Sahasrabudhe	Independent Director	Additional Director appointed as Independent Director at the Annual General Meeting for five consecutive years commencing from 29 June 2015 up to 28 June 2020

Key Managerial Personnel (KMP) appointed during the year

Name of the KMP	Designation
Mr. Anil C. Kulkarni	Executive Director
Ms. Vinaya V. Wagh	Chief Financial Officer
Mr. Aniket A. Deshpande	Company Secretary

Directors and KMPs resigned during the year

None.

Directors proposed to be appointed / re-appointed at the ensuing Annual General Meeting

Mr. G. K. Rao was appointed as an Additional Director with effect from 24 May 2016 and is a non-executive Independent Director. His appointment is up to the ensuing Annual General Meeting. A member has proposed his appointment as Director.

Mr. Anil N. Alawani, retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for reappointment.

The brief resumes and other details relating to Directors who are proposed to be appointed / re-appointed, as required to be disclosed under Regulation 36(3) of the Regulations, forms part of the Explanatory Statement to the Notice of the Annual General Meeting.

NAMES OF COMPANIES WHICH HAVE BECOME OR CEASED TO BE ITS SUBSIDIARIES, JOINT VENTURES OR ASSOCIATE COMPANIES DURING THE YEAR ALONG WITH REASONS THEREFOR

Pursuant to the Composite Scheme, Kirloskar Pneumatic Company Limited (KPC) became subsidiary of the Company. Further, Kirloskar RoadRailer Limited is 100% subsidiary of KPC. Kirloskar Chillers Private Limited is an Associate Company of KPC.

DETAILS OF DEPOSITS WHICH ARE NOT IN COMPLIANCE WITH THE REQUIREMENTS OF CHAPTER V OF THE COMPANIES ACT, 2013

None.

DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS IMPACTING THE GOING CONCERN STATUS AND COMPANYS OPERATIONS IN FUTURE

To the best of our knowledge, the Company has not received any such orders from Regulators, Courts or Tribunals during the year, which may impact the Going Concern Status or the Companys operation in future.

DETAILS IN RESPECT OF ADEQUACY OF INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO THE FINANCIAL STATEMENTS

The Company has developed a strong two tier internal control framework comprising entity level controls and process level controls. The entity level controls of the Company include elements such as defined code of conduct, whistle blower policy, rigorous management review and MIS and strong internal audit mechanism. The process level controls have been ensured by implementing appropriate checks and balances to ensure adherence to Company policies and procedures, efficiency in operations and also reduce the risk of frauds.

Regular management oversight and rigorous periodic testing of internal controls makes the internal controls environment strong at the Company. The Audit Committee along with Management overseas results of the internal audit and reviews implementation on a regular basis.

COMPOSITION OF AUDIT COMMITTEE

The composition of the Audit Committee has been mentioned in the Corporate Governance Report annexed to this Report.

INFORMATION FORMING PART OF THE DIRECTORS REPORT PURSUANT TO RULE 5 OF THE COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014

The relevant information pursuant to Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed at ‘Annexure IV to this Report.

VIGIL MECHANISM

The Board of Directors has adopted the Whistle Blower Policy / Vigil Mechanism (‘the Policy). This has provided a mechanism for directors and employees of the Company and other persons dealing with the Company to report genuine concerns including but not limited to unethical behavior, actual or suspected fraud or violation of the Companys Code of Conduct for Board of Directors and Senior Management (‘the Code) or ethics policy or any other instance to the Chairman of the Audit Committee of the Board of Directors of the Company. The policy has been uploaded at the website of the Company, viz.,www.pneumaticholdings.com.

PREVENTION OF SEXUAL HARASSMENT POLICY

The Company has formulated and implemented the Policy for Prevention of Sexual Harassment at work place. This would inter alia provide a mechanism for the resolution, settlements or prosecution of acts or instances of sexual harassment at work place and to ensure that all employees are treated with respect and dignity. There were no complaints / cases filed / pending with the Company during the year.

CASH FLOW

A Cash Flow Statement for the year ended 31 March 2016 is attached to the Balance Sheet.

CORPORATE GOVERNANCE

In terms of Regulation 34 of the Regulations, a Report on the Corporate Governance along with Compliance Certificate issued by Statutory Auditors of the Company is attached and forms part of the Annual Report.

PARTICULARS OF EMPLOYEES PURSUANT TO SECTION 197 READ WITH RULE 5 OF THE COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014

None.

ACKNOWLEDGMENTS

Your Directors wish to place on record, their appreciation for the contribution made and support provided to the Company by the shareholders, employees and bankers, during the year under the report. .

	For and on behalf of the Board of Directors
	ATUL C. KIRLOSKAR
	CHAIRMAN
Pune: 24 May 2016	DIN:00007387

ANNEXURE II TO THE DIRECTORS REPORT

THE NOMINATION AND REMUNERATION POLICY

(As recommended by the Nomination and Remuneration Committee and approved by the Board)

I. PHILOSOPHY

The Company strongly believes that the system of Corporate Governance protects the interest of all the stakeholders by inculcating transparent business operations and accountability from management towards fulfilling the consistently high standard of Corporate Governance in all facets of the Companys operations.

The Company is committed to provide employment to all eligible applicants on the principles of equality without any discrimination.

The employees have to strictly follow code of ethics and the management practices a zero tolerance for the same.

II. OBJECTIVE

• To strike the right balance in the composition of the Board of Directors by ensuring experts from different spectrum of the existing and / or future business environment are co-opted on the Board to help the Company achieve its objectives, aspirations and growth potential.

• To implement a transparent process of determining remuneration at Board and Senior Management level of the Company that would strengthen confidence of stakeholders in the Company and its management and help in creation of long - term value for them.

• To strike appropriate balance between the elements comprising the remuneration so as to attract and retain potential high performing candidates for critical position in the Company for attaining continual growth in business.

• To ensure a direct relationship with the Key Result Areas and individual achievements considering short as well as long term performance objectives appropriate to the working of the Company and its goals.

III. COVERAGE

A. Policy on Board Diversity and Term of Appointment of Independent Directors:

The Board of Directors shall comprise of persons who have expertise in the areas of business that the Company operates in and of such persons having expertise to help the Company to diversify its business at the appropriate times.

The Nomination and Remuneration Committee of the Board shall recommend persons with the requisite expertise to the Board of Directors for co-option on the Board, at its discretion.

The Independent Directors shall be appointed for two terms as follows:

a. Existing or new Independent Directors below the age of 70, for one term of 5 consecutive years;

b. Existing or new Independent Directors above the age of 70, for one term of such number of years as may be required for the said Independent Director to be 75 years of age;

c. Existing Independent Directors between the age of 74 - 75 years, for one term of 2 consecutive years;

d. New Independent Directors not falling under a to c above, for the first term of 5 consecutive years and for a second term of five consecutive years, subject to the result of the evaluation of their performance and also subject to the approval of the shareholders in the general meeting.

B. Guidelines of determining remuneration of:

i. Executive Directors

ii. Non Executive Directors

iii. Key Managerial Personnel

iv. Senior Management Personnel

IV. REMUNERATION OF DIRECTORS, KEY MANAGERIAL PERSONNEL AND SENIOR MANAGEMENT PERSONNEL

A. DIRECTORS

i. Executive Directors:

The Board of Directors of the Company shall decide the remuneration of Executive Directors on the basis of recommendation from Nomination and Remuneration Committee (N&RC) subject to the overall limits provided under the Companies Act, 2013 and rules made thereunder, including any amendments, modifications and re-enactments thereto (‘the Act) and in compliance with the provisions of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015,(Listing Regulations),including any amendments, modifications and re-enactments thereof, as applicable from time to time. The remuneration shall be approved by the shareholders of the Company, as and when required.

The Company shall enter into a contract with every Executive Director, which will set out the terms and conditions of the appointment. The contract shall be recommended by the N&RC and approved by the Board. The contract shall be maximum for such tenure as may be provided in the Act subject to such approvals as may be required.

The Board may vary any terms and conditions of the contract subject to such approvals, as may be required under the Act.

Every notice sent to the shareholder for seeking their approval for appointment / re-appointment / remuneration of the Executive Directors shall contain the gist of terms and conditions of the contract.

The remuneration components shall include inter-alia:

a. Fixed salary:

Each Executive Director shall be paid fixed salary consisting of basic salary and such allowances and perquisites as may be decided by the Board on the recommendation of the N&RC.

OPTION 1: The revision in the salary may be annually done and shall be determined by the Board as per the appraisal of the performance of each Executive Director by the Board, subject to overall limit approved by the shareholders.

OPTION 2: The salary shall remain fixed for the term of the Executive Director.

b. Commission:

The Board may approve payment of commission subject to the provisions of the Act. The amount of commission to be paid to each of the Executive Director(s), shall be as recommended by the N&RC on the basis of performance evaluation carried out in respect of such Executive Director(s) under Section 178 of the Act and the Listing Regulations.

c. Non-monetary benefits:

Executive Directors may be entitled to club membership, company vehicle with driver, petrol reimbursement, vehicle maintenance, telephone, fax, internet at residence, reimbursement of mobile phone bill, fully furnished accommodation (in case of use of own residential property for accommodation, house rent allowance shall be paid), furnishings, reimbursement of house maintenance expenditure, reimbursement of gas, electricity bill, water and other utilities and repairs at residence, reimbursement of medical expenditure, including domestic hospitalization expenses for self and family and leave travel assistance.

The Executive Directors may also be entitled to personal accident insurance, group accident insurance coverage, medical insurance coverage, term insurance etc. or any other benefit as per Company policy.

d. Stock options:

Executive Directors except promoter directors may be granted stock options as may be approved by the Board, if they are eligible as per existing or any scheme of stock options by the Company.

e. Compensation for loss of office may be paid as may be approved by the Board subject to the provisions of Section 202 of the Act.

f. Separation / Retirement benefits:

Executive Director shall be eligible to the following perquisites which shall be included in the computation of the ceiling on remuneration provided in the Act:

(a) Contribution to provident fund, superannuation fund or annuity fund to the extent these either singly or put together are not taxable under the Income tax Act, 1961 or any amendment thereof;

(b) Gratuity payable at a rate not exceeding half a months salary for each completed year of 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 perquisites shall 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 engagement or appointment to every Non-Executive Director.

The components of payment of remuneration to Non-Executive Directors shall include:

a. Sitting fees :

Sitting fees shall be paid for Board and / or any Committee meetings attended by the Directors. Different amount of sitting fees may be paid for different types of meetings.

Sitting fees shall be over and above the limits prescribed in the Act for payment of remuneration but shall not exceed the amount as may be prescribed in the Rules for independent and non independent directors.

The disclosure of the payment of sitting fees for all types of meetings shall be made in the Annual Report of the Company.

Committees shall include Audit Committee, Nomination and Remuneration Committee, Stakeholders Relationship Committee, or such other committees as may be constituted by the Board from time to time.

b. Commission:

The Board may approve payment of commission subject to the provisions of the Act. The amount of commission to be paid to each of the Non-Executive Director(s), shall be as recommended by the N&RC on the basis of performance evaluation carried out in respect of such Non-Executive Director(s) under Section 178 of the Act and Listing Regulations.

c. Stock Options:

Independent Directors and Promoter Directors shall not be entitled for stock options of the Company.

N&RC may recommend issue of stock options to other directors which may be granted by the Board subject to the compliance of the provisions of relevant laws.

d. Professional fees:

Non Independent Directors may be paid fees for services of professional nature, if in the opinion of N&RC, the Director possesses the requisite qualification for the practice of the profession. The following professionals shall be deemed to be possessing requisite qualification and the N&RC is not required to give their opinion, if the Director is any of the following professional and renders his services to the Company in that capacity:

(a) Journalist

(b) Editor of a magazine but not the publisher or the proprietor

(c) Man of letters writing numerous articles

(d) Author

(e) Engineer

(f) Architect

(g) Solicitor

(h) Stock broker

(i) Film actor

(j) Optician

(k) Commission Agent

(l) Auctioneer, valuer or an estate agent

(m) Chartered Accountant

(n) Advocate

Such professional fees shall not be considered as remuneration for the purpose of Act.

EXCESS REMUNERATION

The Board of Directors may decide to remunerate the Director/s beyond the overall limits provided under the Act, subject to compliance of provisions in this regard including obtaining approval of Central Government, if required, owing to loss incurred by the Company or inadequacy of profits and situation entails providing such remuneration.

WAIVING OF EXCESS REMUNERATION

Any remuneration or sitting fees paid, whether directly or indirectly, to any director whether executive or not beyond the limits prescribed under the Act and for which approval of the shareholders or Central Government is not obtained, if required to be obtained, the same shall be refunded to the Company and until such sum is refunded, hold it in trust for the Company.

Company shall not, in any case, waive the recovery of any such sum unless specific permission is obtained from Central Government for waiving such excess payment.

B. KEY MANAGERIAL PERSONNEL AND SENIOR MANAGEMENT PERSONNEL (SMP)

Key Managerial Personnel (KMP) means Chief Executive Officer, Chief Financial Officer and Company Secretary.

The Company shall issue an appointment letter to every KMP and SMP to be signed by the reporting Executive Director. The letter shall detail the expectation from the role, remuneration package and other terms and conditions.

The remuneration components payable to KMP / SMP may be:

a. Fixed salary:

Each KMP / SMP shall be paid fixed salary consisting of basic salary and such allowances and perquisites as per service rules of the Company. The band of the salary shall be determined according to the industry standards, market conditions, scale of Companys business relating to the position, educational qualification parameters and personal experience in the industry as detailed in the service rules of the Company and such other factors as may be prescribed therein.

The same shall be reviewed annually based on the Companys annual appraisal policy.

b. Variable pay:

Variable pay, if any, to every KMP shall be as per the responsibility of the position, organization and individual performance.

The variable pay shall be payable at the end of financial year based on absolute and relative performance evaluation of the Company as well as individual. The weightage of the same will be decided by the N&RC in each case before the beginning of the each financial year.

c. Non monetary benefits:

Non monetary benefits to KMP / SMP may include club membership, company vehicle with driver, petrol reimbursement, vehicle maintenance, telephone, fax, internet at residence, reimbursement of mobile phone bill, fully furnished accommodation (in case of use of own residential property for accommodation, house rent allowance shall be paid), furnishings, reimbursement of house maintenance expenditure, reimbursement of gas, electricity bill, water and other utilities and repairs at residence, reimbursement of medical expenditure for self and family and leave travel assistance.

KMP may be entitled to personal accident insurance, group accident insurance coverage, medical insurance coverage, term insurance etc. as per Company policy.

d. Stock options:

To motivate executives to pursue long term growth and objectives of the Company, the executive directors may nominate KMP for receiving stock options on the basis of the eligibility criterion of any scheme of stock options declared by the Company.

e. Separation / Retirement benefits:

Separation / retirement benefits as per Company policy which shall include contribution to provident fund, superannuation, gratuity and leave encashment.

DIRECTORS AND OFFICERS LIABILITY INSURANCE

The Company may take Directors and Officers liability insurance or such insurance of like nature for indemnifying any of the Directors or its KMP against any liability in respect of any negligence, default, misfeasance, breach of duty or trust for which they may be guilty in relation to the Company, the premium paid on such insurance shall not be treated as part of remuneration payable to such personnel. Provided that if such person is proved to be guilty, the premium paid shall be treated as part of remuneration.

CONSULTANTS AND ADVISORS

The N&RC may take services of such consultants and advisors as may be required to assist in determination of optimum remuneration structure and evaluation of the same for the Companys Directors and senior management and shall have the authority to approve the fees payable to such consultants and advisors.

The N&RC shall have access to data of the Company relating to annual operating plan, management and leadership programs, employee survey, initiatives, operational reviews for purpose of undertaking their terms of reference and providing such recommendations as are required under the policy and take such assistance from Executive Director as may be required for assessing the effectiveness and performance of any employee covered under the policy.

AMENDMENT

Based on the recommendation of the N&RC, the Board reserves its right to amend or modify this policy in whole or in part, at any time, when it deems appropriate, in accordance with any amendment to the applicable provisions of Companies Act, 2013 including Rules thereof and/or the provisions of the Listing Regulations.

	For and on behalf of the Board of Directors
	Sd/-
	ATUL C. KIRLOSKAR
	CHAIRMAN
Pune: 25 November 2015	DIN:00007387

ANNEXURE IV TO THE DIRECTORS REPORT

INFORMATION FORMING PART OF THE DIRECTORS REPORT PURSUANT TO RULE 5 OF THE COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014

Sr. No.	Particulars
1	The ratio of remuneration of each director to the	Name of Director		Ratio
	median remuneration of the employees of the
	Company for the financial year
		Mr. Atul C. Kirloskar, Chairman		0.33
		Mr. Anil C. Kulkarni # Executive Director		12.19
		Mr. Anil N. Alawani		0.91
		Mr. Vijay K. Bajhal *		0.54
		Mr. Sunil Shah Singh *		0.62
		Mrs. Savita P. Sahasrabudhe *		0.52
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	Name of the Director		Percentage increase / (decrease) in the remuneration
		Not Applicable - This being the first year of operations.
3	The remuneration increase in the median remuneration of employees in the financial year	Not Applicable - This being the first year of operations.
4	The number of permanent employees on the roll of the Company	9 including Executive Director
5	The explanation on the relationship between average increase in remuneration and Company performance	Not Applicable - This being the first year of operations.
6	Comparison on the remuneration of the Key Managerial Personnel against the performance of the Company	The remuneration is not solely based on Company performance but also includes various other factors like individual performance, industry trends, economic situation, future growth prospects, etc. The Board believes that the increase is in line with the industry.
7	Variation in the market capitalizations of the Company, price earnings ratio as at the closing date of the current financial year and percentage increase or 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	This being the first year of operations only current years figures are available.
			As on 31 March 2016
		Market Capitalization	32,261.18
		(Rs. In Lakhs)
		PE Ratio *	42.90
		* source- BSE Limited
		The Company had not made any public offer.
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	Not Applicable - This being the first year of operations.
9	Comparison of each remuneration of the KMP against the performance of the Company	The remuneration is not solely based on Company performance but also includes various other factors like individual performance, industry trends, economic situation, future growth prospects, etc. The Board believes that the increase is in line with the industry.
10	The key parameters for any variable component of remuneration availed by the Directors	Commission is the variable component in the remuneration of Directors. As per the Nomination and Remuneration Policy of the Company, the amount of commission is calculated on the basis of performance evaluation of Directors.
11	The ratio of 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	Not Applicable
12	Affirmation	The Board affirms that the remuneration is as per the Nomination and Remuneration Policy of the Company.
13	Statement showing the name of every employee of the Company, who	Nil
	I. If employed throughout the financial year, was in receipt of remuneration for that year which, in the aggregate, was not less than sixty lakh rupees;
	II. If employed for the part of the financial year, was in receipt of remuneration for any part of that year, at a rate which, in the aggregate, was not less than five lakh rupees per month;
	III. If employed throughout the financial year, or part therefor, was in receipt of remuneration in that year which, in the aggregate, or as the case may be, at a rate which, in the aggregate, is in excess of that drawn by the Managing Director or Whole- Time Director or Manager and holds by himself or alongwith his spouse and dependent children, not less than two percent of the equity shares of the Company.

* Appointed as Non-Executive Independent Directors with effect from 29 June 2015.

# Designated as Key Managerial Personnel with effect from 1 July 2015.

	For and on behalf of the Board of Directors
	Sd/-
	ATUL C. KIRLOSKAR
	CHAIRMAN
Pune: 24 May 2016	DIN:00007387

FORM A

Pursuant to Regulation 33 (4) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, (the Regulations)

1.	Name of the Company	Pneumatic Holdings Limited
2.	Annual Financial Statements for the year ended	31 March 2016(Standalone)
3.	Type of Audit observation	Unmodified
4.	Frequency of observation	Not Applicable
5.	To be signed by	For Pneumatic Holdings Limited
	CEO/ Managing Director
		Sd/-
		A.C.Kulkarni
		Executive Director
		DIN: 00030995
		For Pneumatic Holdings Limited
	CFO
		Sd/-
		Vinaya V. Wagh
		Chief Financial Officer
		Membership No. ACA147460
		For M/S P.G.Bhagwat
	Auditor of the Company
		Sd/-
		Abhijeet Bhagwat
		Partner
		Membership No.136835
		For Pneumatic Holdings Limited
	Audit Committee Chairman
		Sd/-
		V.K.Bajhal
		Chairman of Audit Committee
		DIN: 00531315

Pune : 24 May 2016

FORM B

Pursuant to Regulation 33 (4) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, (the Regulations)

1.	Name of the Company	Pneumatic Holdings Limited
	Annual Financial Statements for the
2.		31 March 2016(Consolidated)
	year ended
3.	Type of Audit qualification	Qualified
4.	Frequency of qualification	Whether appeared first time…
	Draw attention to relevant notes in the annual financial statements and management response to the qualification in the directors report	During the year Kirloskar Pneumatic Company Limited, the Subsidiary Company (Company) had made an application to Central Government (The Ministry of Corporate Affairs) seeking approval for the remuneration payable to the executive chairman due to inadequacy of profits for the year 2014-15. The Ministry of Corporate Affairs vide its letter dated January 15, 2016 rejected application on the ground that company had paid remuneration exceeding 5% of net profits to the Executive Chairman during the financial years 2012-13 & 2013- 14 without obtaining prior approval of the Central Government and further directed recovery of excess remuneration paid amounting to Rs. 200.39 Lacs (Rs. 131.04 lacs net of tax). Company was advised to make an application to the Central Government for seeking waiver of recovery of this amount and accordingly Company has made the requisite application to the Central Government. The said application is pending for approval and therefore Company has not recovered any amount nor accounted it as recoverable in the books of accounts as on 31 March 2016. (Refer Note no. C-9 of consolidated financial statements and also management response in Directors report)
	Additional Comments from the Board / Audit Committee chair;	Management of subsidiary company has been directed to do the needful & record the necessary transaction based on the decision of the Central Government as and when received since the effect is not expected to be material.
5.	To be signed by	For Pneumatic Holdings Limited
	CEO/ Managing Director
		Sd/-
		A.C.Kulkarni
		Executive Director
		DIN: 00030995
		For Pneumatic Holdings Limited
	CFO
		Sd/-
		Vinaya V. Wagh
		Chief Financial Officer
		Membership No. ACA147460
		For M/S P.G.Bhagwat
	Auditor of the Company
		Sd/-
		Abhijeet Bhagwat
		Partner
		Membership No.136835
		For Pneumatic Holdings Limited
	Audit Committee Chairman
		Sd/-
		V.K.Bajhal
		Chairman of Audit Committee
		DIN: 00531315

Pune : 24 May 2016