The developed economies gained traction, whereas emerging economies lost stride in2013. The global recovery was led by fiscal stimulus, low interest rates and reassuranceby the central bankers. The US showed signs of recovery which is reflected by itsimproving economic metrics showing encouraging employment, spending and others. Itstapering quantitative easing programme also led to a currency slide for many economies.The credit scenario had eased up a bit and this translated into an improved resilience inthe Eurozone, disbursing the recessionary fears. Chinas growth, in the second halfof 2013, rebounded on the back of acceleration in investment. (Source: InternationalMonetary Fund)
As per the IMF estimates, the Global GDP Growth is expected to be around 3.9% in 2015,3.7% in 2014, compared to 3% in 2013. The Global trade is likely to ease up and grow at2.5% in 2013 vis-a-vis 2.3% in 2012.
Global recovery, favourable monsoons and a surge in exports are likely to boostIndias GDP growth to 4.7% as against the 4.5% recorded in the previous year. Theyear witnessed a growth of 8% in exports due to improved global demand and rupeedepreciation. Industrial growth weakened further in the year to sub-1% levels, despite amild pick-up of utilities and construction output. There was a contraction in themanufacturing sector for the first time since 1991-92. Fixed investments remained almostflat, owing to weak domestic demand, slow pace of policy reforms and political uncertaintyprior to general elections. Inflation cooled down reasonably on the back of Reserve Bankof Indias numerous rate hikes.
The Current Account Deficit (CAD) is expected to touch its lowest levels as apercentage of GDP, since 2007. The challenge, will however, remain with management ofimports owing to expected surge in economic activity coupled with global liquidityconcerns due to continued US Fed tapering.
Indias GDP growth picked up post a favourable monsoon season and higher exportearnings. The growth is likely to firm up further on the back of stronger structuralpolicies favouring investment, clearances of stalled projects and demand recovery backedby improved external economic climate and these are likely to drive GDP growth to 6% in2014-15.
INDUSTRY AND COMPANY OVERVIEW
A. AGRICULTURE AND ALLIED BUSINESSES
India holds second largest agricultural land under cultivation in the world. While thecountry accounts for only about 2.4% of the worlds geographical area and 4% of itswater resources, it has to support about 17% of the worlds human population and 15%of the livestock.
Pump sets in India are used in domestic, agriculture, construction and industrialsectors. Agriculture sector leads the usage of pumps in India with prominent uses likeirrigation. Use of agri pumpset is inversely related to the amount of rainfall, whichdirectly affects the pumps industry.
Increasingly, farm mechanization is becoming very critical for farm operations,improving land and labour efficiency, increasing productivity and reducing crop losses.The tractor density in India is about 16 tractors for 1,000 hectares, as against the worldaverage of 19 tractors and that in USA 27 tractors per one thousand hectare of croppedarea. (Source: Ministry of Agriculture)
The Companys domestic agri business primarily comprises diesel-pumpsets, althoughthe Company also supplies engines used in other products /applications such as concretemixer, aerators etc. The Company is the market leader in diesel-pumpsets with 17% marketshare. The Company competes with both domestic manufacturers (both organized andunorganized) as well as Chinese imports. Apart from a strong brand, the Companys keycompetitive advantage lies in its extensive reach across the far corners of the country.The Companys agri range is available in over 3000 locations across 3400 retailers,along with the ability to deliver prompt and reliable service in all these areas.
Delayed and excessive rains in large parts of the country had an adverse impact on theAgri business for the year. The Companys revenue from the agri-allied business stoodat Rs. 375 crore for the current year, compared to Rs. 424 crore in the previous year.Despite a tough market, the Company managed to improve its market share through acombination of strengthening its reach and launching new products to address addedapplications.
New product launches
Petrol-Kerosene pumpsets were the latest addition to the portfolio of theCompany. With pumps ranging from the self-priming and non-self-priming range, thePetrol-Kerosene pumps by the Company have been well received in the market. In the currentfinancial year, over 5000 units were sold, backed by some very good features. Some of thekey features are-
Light and compact
Easy after sale service
Wide range of products (in terms of Horse power)
AV1 XL-air-cooled engine was another key product launched by the Company. With greatfeatures and wide range in offerings, the product was aggressively marketed in UttarPradesh (one of the key agriculture belts of the country). There were 1,243 units sold forthe year ended 2013-14 of AV1-XL, and the Company is expected to increase its total salesin the coming year.
In the agri-engines air-cooled series, Varsha High Discharge pumps were the latestaddition to the Varsha series. The pumps stand out in terms of head range (7 meters to 11meters) and discharge range (22.5 to 12 liters per second). Available in diverse powerrange, the pump is expected to bring in additional revenue for the Company in the comingyears.
Prospects for the coming year
A normal monsoon remains a vital necessity for the agricultural sector. While overallmarket growth or lack thereof is dependent on the weather, the Company remain focused onenhancing its market share. Concerted efforts which are being taken to increase the numberof retailers and hence the reach in the market will augur well in the coming year and helpin further improving customer service and contact. This, together with efforts in productre-engineering and new product introductions should help spur the sale in the Agri andallied crop irrigation business.
B. POWER GENERATION BUSINESS
The diesel generator set market in India is well organized and highly competitive. Themarket can broadly be segmented as small diesel generators (15-75 kVA), medium dieselgenerators (75.1 375 kVA) and large diesel generators (375.1 2000 kVA). High growth in theindustrial sector and peak power deficit is expected to boost diesel generator set salesin India.(Source: Frost and Sullivan report). Based on its end-usage, the gensetsfind applicability across the following sectors
Large- and small-scale industries
Commercial and residential
Hospitals and healthcare
Retail and restaurants
The Company is a market leader in the small and medium segments of the Indian gensetmarket, with approximately 33% market share across these two segments. The Company hasstrengthened its presence in the lower ranges (375-625 kVA) of the large genset segmentthrough its indigenously developed DV series of gensets and is a strong #2 in thesesegments it competes in, within the large genset market, with 13% market share. While thesmall engine market is more fragmented with many competitors, the medium and largesegments see limited competition from a few MNCs and large Indian companies. TheCompanys range of gensets come with the reputation of reliable, fuel-efficient,supported by strong after-sales service (even in upcountry markets), thereby offeringlowest total cost of ownership for the genset user.
The overall economic slowdown and adverse market conditions led to lower power deficitin most regions of the country. Consequently, there was a sharp fall in the demand forGensets. This in turn affected Companys business in this segment. The Companysrevenue from the power generation business stood at Rs. 745 crores (including sale ofalternators of Rs. 56 crores) for the current year, compared to Rs. 860 crores in theprevious year. Despite the subdued demand, the Company was able to maintain its marketshare. There was shrinkage in volume terms of Power Generation segment by 20% Y-o-Y;DGS&D, Railways, Defense and Petrol stations registered a positive growth of more than40% as compared to the previous year. Sale of genset to telecom sector was down by 40% ascompared to the previous year. Some of the key factors that affected the segment were:
Delay in the execution of infrastructure and related projects due to slowdown inthe overall economy.
Lowest Power deficit in last 5 years, at 3% from an average of 9 to 10%
The demand in relatively stable power markets is shifting to inverters orrenewable energy sources like Solar and Wind.
Telecom shifting to Green sites in some urban markets which hasadverse impact on DG consumption.
Initiatives to boost the segment
During the year that went by, the sales and marketing team have worked on severalinitiatives. Some of them were:
PoT (Power of Ten) - Ten years of free Service on key products
Improving product availability (through increased dealerships in untappedregions)
Establishing 24 X 7 call centres for addressing customer grievances
Introduction of Bandhan - Long term service engagement programmesfor customers for trouble free DG performance.
All the above initiatives helped the Company to retain its market share as compared tothe previous year.
Prospects for the coming year
The much awaited cut-off date for CPCB II norms has now been gazetted as 1 July 2014.All engines and gensets sold after that date needs to conform with CPCB II norms. TheCompanys R&D team has been working relentlessly to ensure that the Companydelivers a high quality product, fully compliant with the norms. With changes andenhancements necessitate to meet regulatory norms, prices are expected to risesignificantly post implementation of CPCB-II norms and the market may witness turbulence,in the short term, due to the uncertainty with regards to the pricing. A lot of theinitiatives taken in Financial Year 2013-14 are expected to start paying dividends in thecoming year. The Company also plans to expand its product range in the large gensetsegment area over Financial Year 2014-15. A stable Government at centre is also expectedto play its part in overall market optimism and buoyancy.
C. INDUSTRIAL ENGINES BUSINESS
For the second consecutive year, there was a slump in the industrial engine segment.The overall market size of 64,000 engines in Financial Year 2012-13 dropped down to 55,000engines in Financial Year 2013-14 (14% drop). The size of the market in Financial Year2011-12 was 80,000 engines. Some of the principal factors were:
Economic slowdown resulting in sharp decline in demand for constructionequipment
Delay in infrastructure projects due to recessionary issues and green clearance
The mining sector was affected due to Government sanctions
Some Original Equipment Manufacturers (OEMs) are already exploring options of backwardintegration with their own engines. Lower fuel consumption is being used as a uniqueselling proposition.
The Companys industrial engines cater to two broad segments constructionequipment and tractors. The Company is the market leader in engines for constructionequipment, with a market share of 30%. A wide range of products back-hoe loaders,excavators, motor graders, concrete pumps seen on Indian roads and project sites arepowered by the Companys engines. The Company is a niche player in tractor engines,as most tractor manufacturers use captive engines.
The Companys revenue from the industrial engines business stood at Rs. 346 crorefor the current year, which was the same as compared to the previous year.
Given the adverse market conditions in the construction equipment market, the Companydid well to contain any further fall. Aggressive marketing and good customer relationshipsensured retention of 30% share in terms of volume of engines sold in Financial Year2013-14 for construction equipment. The Company did not lose a single customer or anyapplication to competitors. The tractor engines business faired better in Financial Year2013-14, showing positive growth.
Seeing an opportunity, the Company successfully entered into 20-Ton excavator and motorgrader equipment which was very well accepted by the market. The year also witnessed goodorders from the tractors and the FM/UL segments.
Prospects for the coming year
With a stable Government at the centre, expectations are adrift that a lot ofinfrastructural projects which are on hold earlier, may get cleared and the industry whichis presently down may bounce back to normalcy to record 10% growth over previous year. Thetractor industry which grew by 23% in the previous year is expected to continue its growthtrajectory.
D. LARGE ENGINES BUSINESS
The large engines business in India, suffered a set back due to surge in Heavy Fuel Oil(HFO) prices leading to no market for HFO based DG sets. Customers with existing HFO DGset decided to keep them on standby.
The commercial marine segment was also badly affected, because of global economicslowdown. The Indian ship building industry faced the brunt, as a result of this.
The Companys Large Engines Business competes within a few niche applications ofthe large engines market, such as gensets for Emergency Power at Nuclear plants anddefence applications, as well as to specific marine applications. The Company hashistorically been a dominant supplier to marquee clients such as Nuclear Power Corporationof India Limited (NPCIL) and the Indian Navy. The Company also competes in marine engines,where it also has a technology tie-up with MAN Diesel and Turbo SAS, (Erstwhile SEMTPielstick, France).
The Companys revenue from the Large Engines Business stood at Rs. 301 crores forthe current year, compared to Rs. 168 crores in the previous year.
During the year following activities were completed successfully :
All critical seismic analysis and tests on DG set powered with 18PA6V engine, tobe supplied to NPCIL. 9 DG sets were manufactured and dispatched in the year out of thetotal order of 16 DG sets.
Successfully commissioned two ship sets of naval OPV class at Goa Shipyard Ltd,which is powered with 2 X 20PA6B STC engines per ship set.
Prospects for the coming year
Besides completing the delivery of balance 5 DG sets engines to NPCIL, the Companycontinues to be in talks with NPCIL for strengthening the order book. Marine orders willalso be the point of focus. The Company believe, that it has the requisite technicalskills backed by sound project execution skills to execute large orders within definedtime frames and hence revival of the economy will provide the necessary fillip to thebusiness.
E. CUSTOMER SUPPORT
The Companys commitment to provide quality service to all its customers continuedunabated. An extensive network of 362 well-equipped service outlets spread across Indiaensured prompt and timely after sales service to all the Companys customers. TheCompany sees a continuing opportunity to provide quality service with optimum lead time torepair. The slowdown in the economy resulted in lower power deficit, consequently, DG setsand construction equipment usage were down. This in turn resulted in low consumption ofspares and oil.
To ensure that the Companys high service standards are maintained and improvedfurther, the Company has initiated following actions to improve the service levels:
Online Monitoring of Maximum Time to Repair (MTTR) at Dealer level.
Increased service outlets in un-represented areas.
Formation of escalation matrix for delayed service.
Introduced Bandhan - Long term service engagement package tocustomers for trouble free DG.
The Companys international business supplies engines and generators to over 30countries, for a wide range of applications such as gensets, agri pumpsets, mining andconstruction equipment. Middle-east and Africa are the largest geographies for theCompany, accounting for over 85% of international revenues. The Company has a strongmarket presence with double-digit market-shares in specific markets such as Nepal,Lebanon, Zambia, South Africa, Sri Lanka, Qatar and Kenya.
Revenue from exports in Financial Year 2013-14 was Rs. 198 crores as against Rs. 168crores in the previous fiscal. Given the challenging macroeconomic environment, thisgrowth of 18.2% as compared to Previous Year was healthy.
The Company commenced preliminary seeding activity in new markets of Togo, Benin,Burkina Faso, Philippines and Algeria. Besides, the Company is also exploring the newmarkets of Bangladesh, Myanmar and Botswana to expand its footprint. With regards to thenew OEMs, there was a breakthrough in the new markets of France, Bangladesh and Israel.The Companys exports to markets like South Africa, Nigeria, Kuwait, Indonesia,Zambia, Lebanon, Nepal and United States of America has grown over 20% in the FinancialYear 2013-14 over Financial Year 2012-13.
Political instability in some of the Middle East and African countries has affected theperformance in those markets and it is expected that normalcy will return in thesecountries in the coming financial year. Labour unrest in Mining Industry in South Africahas affected the Industrial business, which also is expected to come back to normalcyduring the coming year.
Exhibit: Region-wise percentage of exports for the year (%)
|Region||% of Total|
|Middle Eastern countries||52|
Prospects for the coming year
Currently, the Company exports products to over 30 countries and the endeavor is toincrease market share in the existing markets and also enter into new markets in Africaand South East Asia. The Company is working on strengthening the present trade partners toprovide the requisite fillip in the existing markets too.
Gaining global presence
Exports continue to be a key focus area for the Company. The Company faces severe pricecompetition from multinational players in the Power Generation segment and in theAgriculture segment it faces fierce competition from the Chinese and other domesticplayers.
In order to build on the brand value of Kirloskar and increase brand recognition, theCompany participated in several key exhibitions across South Africa, UAE, Myanmar, SriLanka and Morocco amongst others. The brand is also widely advertised in various printmedia to cover Middle East and Africa The Company has also been working closely withdistributors in various markets to augment sales.
FINANCIAL PERFORMANCE - REVENUE
SNAPSHOT ACROSS VERTICALS
|Power Generation||Agri & allied Business||Industrial Engines||Customer Support||Exports||Large Engines|
|FY 2012-13 (%)||37.07||18.26||14.95||14.80||7.50||7.25|
|FY 2013-14 (%)||32.55||16.38||15.15||14.02||8.62||13.17|
RESEARCH AND ENGINEERING
In order to meet customer needs, and remain competitive, the Company continues toinvest in new product development programs and application engineering projects. Researchoften leads to innovative offerings that provide cost effective solutions and valueengineering upgrades to Companys existing and prospective product lines. Theseofferings not only help open up new segments and markets but often are necessitated merelyto conform to new regulatory standards and norms. The Company is confident of ensuring asmooth transition from CPCB I to CPCB II norms that will come into effect from 1 July2014, for engines and DG sets.
The Companys commitment to quality remains unabated. Improvement and enhancementin product quality is a continuous process and the endeavor is to deliver superior qualityproducts backed by best in class service. It is this faith in Companys products andservice that led the Company to offer a unique offering of 10 year free service ongenerators. It is expected that this campaign will be a differentiator in the market. Someof the proactive steps for improvement in product quality were:
Focused Supplier Quality Improvement programs, benefits of which have beenrealized in terms of reduced PPM levels.
Working closely with vendors in improving quality of components.
Working on customer suggestions / complaints in a focused manner.
VENDOR DEVELOPMENT AND MATERIAL COST OPTIMIZATION
The Company has over the years, nurtured and cultivated long term strategic allianceswith key vendors. Getting vendors involved in early stages of product development hasaugured well and led to useful value engineering and cost optimization.
Vendor development initiatives
Training on special processes like heat treatment, welding as per CQI guidelineswere conducted for vendors
Special training modules on manufacturing process, PPAP, cutting tools, energycost optimisation, GD&T, MSA etc. were developed and imparted to them.
Involvement of vendors in early stages of product development has led to cocreations.
New Vendor development
Supplier development activity was pursued in line with business necessity. An earlyinvolvement of vendors translated into substantial improvements at the design stageitself. New suppliers were added to support various initiatives like technologyupgradation, new emission norms and cost optimization.
New material development
Use of alternate material was explored as a part of reliability improvement and ValueEngineering initiatives. These have been introduced in both, present as well as newproduct development. These major material changeovers include:
Usage of thermoplastic
High temperature fasteners
MLS and RCS gaskets
Si-Mo exhaust manifolds
ENVIRONMENT, OCCUPATIONAL HEALTH AND SAFETY (EHS)
During the year, several initiatives were undertaken, across plants and offices, in theareas of Environment, Occupational Health and Safety (EHS). The Leadership at Company, isfully committed to ensuring the highest standards of Safety and Health for all itsemployees.
Some of the key initiatives undertaken during the year across plants are :
Elimination of wooden packing
Reduction in the testing time leading to diesel saving for HA Industrial Engine
Reduction in fuel consumption as a result of fuel priming before commencement oftesting
Reduction of the chemical consumption required for treatment of industrialeffluent
Reduction in weight of ETP Sludge
Better control on PH of Effluent
Usage of Biogas for cooking in the canteen
Green belt development in plant premises
Reduction in Air Pollution
Reduction in noise level
Hazardous Waste Elimination
Reduction in Noise Level
Reuse of RO Reject Water
Avoidance of Oil Leakages
Implementation of illumination level at test cells
Reconditioning of ventilation system at paint booths to avoid paint fumes
Employee health and well-being are of paramount importance to the Company. Medicalcheck-ups, both general and specialized are carried out at regular intervals across allplants and locations. Besides, regular awareness creating lectures on health, fitness,common ailments and diseases and lifestyle improvements are delivered across employeecross sections. Examples of some of the key initiatives taken during the year are :
Health Assessment Camp with Body Fat mass analysis (BMI), together with Skin andHair analysis at Pune.
Eye checkup camp for vision and refraction correction.
Lecture and demonstration of advance acupressure and Sujok therapy by Dr. NitinJadhav from Mumbai. This lecture covered the treatment methods on various aspects likemental stress, diabetes, blood pressure, acidity, kidney stone, piles, back pain, weightloss etc.
Lecture on prevention and management of backaches by a team of Physiotherapistsfrom Sancheti Hospital.
Improving workplace safety continued to be high priority across all manufacturinglocations and offices. Some of the initiatives taken to enhance safety were :
On-line accident reporting system developed and trials carried out for all fourfactory locations thus enabling quick sharing and corrective actions.
On-line EHS documentation and document control system for all locations wasimplemented.
EMS/OHSA internal auditor trainings conducted in-house by corporate safety department.
EMS/OHSAS Inclusion of Team associates in safety committee for betterunderstanding and resolution of problems on the ground.
Project safety manual developed by corporate safety department for NPCIL KAPPsite and approved by the respective authorities. Site work in progress without a singleaccident.
Total no. of programmes conducted: 103
Total no. of participants: 2,365
Total no. of training man hours: 5,357
HUMAN RESOURCES AND INDUSTRIAL
As on 31 March 2014, the Company had 2,428 employees on its roll. The Company continuesto maintain healthy and harmonious industrial relations across all manufacturing units.The ultimate Human Resource goal of the Company is to develop people competencies toenable them to deliver as per the Companys strategies. The Human ResourcesManagement team at the Company has continued its efforts and actions to provide efficient,effective and comprehensive services to its internal customers focused towards creating aculture of sustained business out performance. These have been achieved through deploymentof an integrated talent management process.
Various initiatives such as career planning, rewards, learning and development, growthand competitive compensation have been taken during the year.
Development centres are held regularly to assess people against positions that theywill attain. Individual development plans are drawn out to enable them to attain thoseskills and competencies, therein.
Right people at the right place
Sustained performance results from having the right people at the right place withinthe organisation. In Financial Year 2013-14, adequate efforts have been taken to increasethe size of the Talent Pool. This was done through focusing on critical positions byattracting and retaining the best candidates.
Building a talent and leadership pipeline
The Company also commenced an engagement cum talent acquisition initiative with premierengineering and management institute campuses across India to fulfil the need for juniorand middle level talent. This initiative is envisaged to provide a robust talent andleadership pipeline for growth in existing business and entry into new business segments.
Successors are being identified for key positions and development activities forcapability building are being drawn up to ensure that Key and critical position holdersare able to drive growth for the Company.
Driven by values
Our focus on values remains undiminished as we believe that belief and action linked bycommon set of values will drive the Companys performance to greater heights. Focuson values is constantly reinforced through day-to-day actions and conversations and formthe bedrock of everything that Company do. A values workshop is also being conductedfor all new entrants into the organization.
Other HR initiatives
The Company has completed an exercise with a leading consultant to create aposition-based organisation structure. A culture of continuous learning is also beingimplemented within the organisation. Skill Gap analysis for employees has been initiatedin the year with emphasis on identification of existing gaps in the individual developmentplans.
Continuous focus has been on making Sales and Marketing organisations morefocused and delivery oriented. 131 people have benefited from a selling programme forAgriculture and Allied Business Unit. The success of this programme will see an extensioninto other verticals as well.
The employees aspirations to grow and develop are addressed throughspecialised induction programmes that include BS in Manufacturing (tie-up with BITS,Pilani) and EPBM i.e. Executive Program in Business Management (tie-up with IIM-C).
CORPORATE SOCIAL RESPONSIBILITY
The Company strongly believes in good Corporate citizenship and in enriching lives ofpeople through CSR initiatives. Since a fair amount of these initiatives are done throughemployee volunteering, most activities are undertaken with communities surroundingCompanys plants. The key areas identified are health, education, environment andlivelihood. Some of the initiatives undertaken are:
HIV/Aids awareness and safety beyond workplace
Support for Kirloskar Foundations WASH activities, which include,provision of clean drinking water, use of Toilets, hand Wash etc. where 82 KOELians workedas volunteers in 21 schools and spent 2,527 man hours
Anaemia awareness program for women from Ramabai Ambedkar Nagar, Nashik
Computer Literacy Program
Cash Awards to meritorious students from 9th Standard
Disha - Career Guidance Workshop for 10th and 12th Standard Students
Teachers training program
Atul C Kirloskar , Executive Chairman
Gautam A Kulkarni , Executive Vice Chairman
Rahul C Kirloskar , Director
R R Deshpande , Executive Director
Company Head Office / Quarters:
Laxmanrao Kirloskar Road,
Phone : Maharashtra-91-20-25810341 / Maharashtra-
Fax : Maharashtra-91-20-25813208/0209 / Maharashtra-
E-mail : email@example.com
Web : http://www.koel.co.in
Link Intime India Pvt Ltd
BNo 202 Akshay Compl,Off Dhole Patil Road,Near Ganesh Mandir ,Pune-411001
|Scheme Name||No. of Shares|
|UTI-Infrastructure Fund (G)||6,40,000|
|L&T Emerging Businesses Fund (G)||2,31,400|
|Reliance Small Cap Fund (G)||2,16,100|
|AXIS Small Cap Fund (G)||1,50,000|
|L&T Infrastructure Fund (G)||79,000|