Kirloskar Industries Ltd Directors Report.

for Financial Year 2020-2021

To The Members,

The Directors have pleasure in presenting this 27th Annual Report with the Audited Annual Accounts of the Company for the year ended 31 March 2021.

I. FINANCIAL PERFORMANCE (STANDALONE):

(Rs in Crores)

Particulars 2020-2021 2019-2020
Total Income 58.11 86.09
Total Expenditure 25.66 21.17
Profit before exceptional items and taxation 32.45 64.92
Profit before taxation 32.45 64.92
Provision for tax (including Deferred Tax) 5.26 5.47
Net Profit 27.19 59.45
Balance of Profit / (Loss) from previous year 514.30 486.46
Add: Lapse of ESOP outstanding - -
Less: Re-measurement of defined benefit plans (net of Taxes) 0.17 (0.22)
Dividend paid on equity shares:
Final Dividend for the Financial Year 2019-2020 (2018-2019) -- 20.39
Interim Dividend for the Financial Year 2020-2021 (2019-2020) -- 9.71
Tax on final / interim dividend:
Final Dividend for the Financial Year 2019-2020 (2018-2019) -- 1.29
Profit available for appropriation 541.66 514.30
Balance carried to Surplus in Statement of Profit and Loss 541.66 514.30

II. DIVIDEND:

Your Directors recommend 100 % dividend, i.e., Rs 10 per equity share of Rs 10 each (Previous year dividend 100%, i.e., Rs 10 per equity share of Rs 10 each) for the Financial Year ended 31 March 2021.

III. CLASSIFICATION OF THE COMPANY AS UNREGISTERED CORE INVESTMENT COMPANY (CIC):

The Company is ‘Unregistered CIC regulated by the Reserve Bank of India (RBI) and is complying with all the regulations required for ‘Unregistered CIC.

IV. MANAGEMENT DISCUSSION AND ANALYSIS REPORT:

A. OPERATIONS OF THE COMPANY:

WINDMILLS:

The Company has seven Wind Energy Generators (WEGs) in Maharashtra with total installed capacity of 5.6 Megawatt (MW). The WEGs are located at Tirade Village, Tal. Akole, Dist. Ahmednagar.

The WEGs have generated net wind energy of around 0.68 Crores units of electricity in the period under review as against 0.98 Crores units of electricity in the previous year showing decrease of 30% over the previous year. During the period under review, the generation is lower due to lower wind speed and motor winding issues related to one of the seven machines in operation. These winding issues are currently being addressed.

Further, the Company realised lower revenue due to regulatory changes made by the Maharashtra State Electricity Distribution Company Limited (MSEDCL), which affected the billing rates.

The Company had identified a third-party consumer to sell brown energy for the period from 1 April 2020 to 30 June 2020. However, due to the outbreak of COVID-19, plants of the identified third-party consumer were shut down. To avoid losses, the Company sold wind generated units for this period to MSEDCL. Subsequently, the Company sold wind generated units to third party consumers for the period from 1 July 2020 to 31 March 2021, as per the Open Access Permissions received from MSEDCL.

The Company has also sold 271 Renewable Energy Certificates (RECs), which has resulted in revenue of 0.03 Crores (previous year 0.25 Crores). The Company is holding 7,179 unsold RECs as on 31 March 2021. The REC Trading Exchange was not in operation in quarters 2, 3 and 4 and hence no sale transactions could be done during three quarters.

REAL ESTATE ACTIVITIES:

The Company acquired 100% equity share capital of Wellness Space Developers Private Limited (WSDPL) on 19 December 2020. Consequently, WSDPL became a Wholly Owned Subsidiary of the Company with effect from 19 December 2020.

To facilitate effective management of the real estate activities of the Company, the Company transferred its ‘Real Estate Business Undertaking at Kothrud on a going concern basis by way of a ‘Slump Sale to WSDPL, Wholly Owned Subsidiary of the Company for a lump sum consideration of Rs 75 Crores, by executing the Business Transfer Agreement (BTA) by and between the Company and WSDPL dated 19 December 2020. In terms of the BTA, the said purchase consideration shall be payable to the Company, on or before 30 June 2021 or any other date as may be mutually agreed.

Further, WSDPL has been converted from a private limited company to a public limited company with effect from 17 March 2021, viz., Wellness Space Developers Limited (WSDL).

OTHERS:

The Company owns lands and buildings thereon and apartments and offices in Pune, New Delhi and Jaipur. The Company has given most of these lands and buildings and offices on leave and license basis to group and other companies which generated revenue of Rs 25.41 Crores (Rs 27.74 Crores as on 31 March 2020). The revenue reduction was consequent to a 10% reduction in the lease rental from July 2020 till 31 March 2021, owing to the COVID-19 Pandemic. However, from the current Financial Year, rentals have been restored to the pre-pandemic rates.

The Company being a CIC continues to invest the surplus funds in fixed deposits and liquid funds. These investments stood at Rs 81.60 Crores (previous year Rs 81.01 Crores) as at 31 March 2021. These surplus funds will be used for the business operations of the Company as and when required.

During the period under review, your Company made an investment of 0.015 Crores (10,000 equity shares of Rs 10 each, acquired at Rs 15 each) in the equity shares of Wellness Space Developers Limited (WSDL). Pursuant to the said investment, WSDL is a Wholly Owned Subsidiary of the Company as on 31 March 2021.

B. COMPANY PERFORMANCE:

During the period under review, your Company earned a total income of Rs 58.11 Crores (previous year Rs 86.09 Crores).

During the period under review, the Company received final dividend of Rs 9.41 Crores (previous year Rs 25.40 Crores) declared by the investee companies for the Financial Year 2019-2020.

The Company also received interim dividend of Rs 15.36 Crores (previous year Rs 22.94 Crores) declared by some of the investee companies during the year 2020-2021. Consequently, the total dividend inflow during the fiscal year under review was Rs 24.77 Crores (previous year Rs 48.34 Crores).

The Profit Before Tax is lower at Rs 32.45 Crores (previous year Rs 64.92 Crores) mainly due to lower dividend income received, lower revenues from windmill business and reduced lease rental income in the year under review.

C. HUMAN RESOURCES:

As on 31 March 2021, the Company had 14 employees (previous year 23 employees) on its roll, including the Managing Director and the Executive Director. During the period under review, 11 employees of the Company were transferred to Wellness Space Developers Limited (WSDL), Wholly Owned Subsidiary of the Company, consequent to the Business Transfer Agreement executed by and between the Company and WSDL on 19 December 2020.

D. KIRLOSKAR INDUSTRIES LIMITED - EMPLOYEES STOCK APPRECIATION RIGHTS PLAN 2019

Pursuant to the ‘Kirloskar Industries Limited - Employees Stock Appreciation Rights Plan 2019 (KIL ESARP 2019), the Company had granted an aggregate of 4,79,898 Equity Settled Stock Appreciation Rights (ESARs) at an exercise price of Rs 500 per ESAR to eligible employees of the Company on 30 January 2020.

Consequent to the Business Transfer Agreement (BTA) dated 19 December 2020, executed by and between the Company and Wellness Space Developers Private Limited (WSDPL), Wholly Owned Subsidiary of the Company, certain employees of the Company were transferred to WSDPL with effect from 1 January 2021.

Pursuant to KIL ESARP 2019, ESARs granted shall vest after a minimum period of 1 year but not later than a maximum period of 4 years from the grant date of such ESARs.

On 5 February 2021, the Company had vested 2,14,449 ESARs out of the 4,70,898 ESARs granted during the previous year, in the employees of the Company; employees of WSDL (then WSDPL) who were transferred from the Company under the BTA; and in the Non - Executive Director of the Company, who is the Managing Director of WSDL to whom ESARs were granted under the KIL ESARP 2019.

KIL ESARP 2019 was introduced in accordance with the SEBI guidelines for the employees of the Company and its subsidiaries. The Company has obtained in-principle approval for the KIL ESARP 2019 from BSE Limited and National Stock Exchange of India Limited on 3 December 2020 and 19 January 2021, respectively. KIL ESARP 2019 is administered by the Nomination and Remuneration Committee of the Board of Directors of the Company.

KIL ESARP 2019 is in compliance with the applicable provisions of the Companies Act, 2013, and its Rules, SEBI (Share Based Employees Benefits) Regulations, 2014, (Employees Benefit Regulations) and other applicable Regulations, if any. Accordingly, a certificate from G. D. Apte & Co., Chartered Accountants, Statutory Auditors of the Company, confirming that the KIL ESARP 2019, has been implemented in accordance with Employees Benefits Regulations and in accordance with the Special Resolution passed by the Company through Postal Ballot on 29 December 2019, would be placed before the members at the ensuing Annual General Meeting. A copy of the same will also be available for the inspection at the Companys Registered Office.

Details of KIL ESARP 2019, as required under Rule 12 (9) of the Companies (Share Capital and Debentures) Rules, 2014, read with Regulation 14 of Employees Benefits Regulations, as on 31 March 2021, are set out in ‘Annexure I to this Report and are available on the Companys website at www.kil.net.in.

E. CONCERNS AND THREATS:

As a practice of good corporate governance, the Board of Directors has voluntarily constituted a Risk Management Committee (the Committee) to identify the risks, mitigate the same and monitor the development and deployment of risk mitigation action plans for the businesses of the Company.

Pursuant to the BTA, risks associated with the real estate business, which were transferred to Wellness Space Developers Limited (WSDL) are monitored and reviewed by the Board of WSDL.

The Company has deployed risk management process which includes risk identification, its assessment and its treatment, mitigation, monitoring and reviewing actions. The Company prioritises and manages the risks identified through its Risk Registers.

The Committee regularly presents the risk assessment and mitigation procedures adopted to assess the reliability of the risk management structure and efficiency of the process before the Audit Committee and the Board of Directors of the Company at their respective meetings.

The Committee meets every quarter, discusses all the mapped risks, evaluates future risks and reviews the mitigation plan for the identified risks for all business segments.

F. PROSPECTS:

As members are aware, since March 2020, the World has been seeing the impact due to COVID-19 Pandemic which has in turn affected economic activities in the Country. The Central and State Governments have taken various significant measures including national and local lock downs besides various other regulatory strictures to contain the virus.

IMPACT ON THE PERFORMANCE OF THE COMPANY DUE TO OUTBREAK OF COVID-19 :

The Company earned a lower property licensing fees during the Financial Year 2020-2021, due to the COVID-19 impact.

The recommended protocols and guidelines issued by the Central and State Governments as well as Regulatory bodies are being completely adhered to.

To ensure safety and wellbeing of the employees, the Company continues to follow precautions against COVID-19 which include work from home policy, regular communication with employees, online meetings, travel restrictions and health advisories.

The following necessary precautions are also being conducted:

• Thermal screening at the entry point.

• Sanitisation of materials at the entry point.

• Masks for employees and visitors.

• Heightened cleaning and sanitisation of the office premises at regular intervals.

• Maintaining social distance at all our offices.

G. INTERNAL CONTROLS SYSTEM AND THEIR ADEQUACY:

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

The internal controls 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.

H. 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 may differ materially from those either expressed or implied.

I. SEBI REGULATIONS AND 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.

J. DETAILS OF MATERIAL SUBSIDIARY:

In terms of the provisions of the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, (the Regulations), Kirloskar Ferrous Industries Limited (KFIL) is a material subsidiary of the Company, in which, the Company holds 51.06% of its total shareholding.

During the period under review, KFIL has not sold / disposed off and leased assets more than 20% of its assets.

K. SUBSIDIARY COMPANY AND CONSOLIDATED FINANCIAL STATEMENTS:

As on 31 March 2021, the Company has following two subsidiaries, i.e.,

1. Kirloskar Ferrous Industries Limited (KFIL), and

2. Wellness Space Developers Limited (WSDL).

The Consolidated Financial Statements of the Company and its subsidiaries, prepared in accordance with IND AS 110, issued by the Institute of Chartered Accountants of India, forms part of this Annual Report. A statement containing the salient features of the Financial Statement of the subsidiary companies is attached to the Financial Statements of the Company in Form AOC-1.

Pursuant to the provisions of Section 136 of the Companies Act, 2013, the Financial Statements along with relevant documents of the Company and its subsidiaries, are available on the Companys website, viz., www.kil.net.in.

The Financial Statements of the subsidiaries and related detailed information will be kept for inspection by any member at the Companys Registered Office and will also be made available to the members on demand, at any point of time.

BRIEF HIGHLIGHTS OF BUSINESSES OF SUBSIDIARY COMPANIES:

KIRLOSKAR FERROUS INDUSTRIES LIMITED:

Kirloskar Ferrous Industries Limited (KFIL) is in the business of manufacturing of iron castings and has its manufacturing facilities at Bevinahalli village in Karnataka and Solapur in Maharashtra.

The Board of Directors of KFIL declared an interim dividend of Rs 2 (40%) per equity share on 2 March 2021 and paid out in March 2021.

The Board of Directors of KFIL in its meeting held on 5 May 2021, have also recommended a final dividend of Rs 3 (60%) per equity share for the Financial Year ended 31 March 2021. Accordingly, the total dividend (inclusive of interim dividend declared and paid) for the Financial Year 20202021 is 100%.

During the period under review, there has been a substantial improvement in the performance of KFIL both in sales and profit. KFIL achieved net sales of Rs 2,038.08 Crores (previous year Rs 1,849.66 Crores).

The Profit Before Tax (PBT) for the year under review was higher at Rs 363.19 Crores, as compared to Rs 156.18 Crores of previous year, after providing for depreciation and amortisation.

During the year under review, KFIL completed the acquisition of movable and immovable assets relating to the Pig Iron plant of VSL Steels Limited with a capacity of 1,50,000 MT per annum, situated at Paramenahally Village, Hiriyur, Chitradurga District, Karnataka in December 2020, for a consideration of Rs 135 Crores. After renovation of plant and machineries, manufacturing operations of that plant commenced on 8 February 2021.

During the year under review, KFIL sold 3,13,690 MT of Pig Iron (includes 12,824 MT from the newly acquired Pig Iron Plant) valued at Rs 1,067.32 Crores, as compared to 3,58,146 MT of Pig Iron valued at Rs 1,070 Crores in the previous year.

KFIL sold 92,507 MT castings aggregating to Rs 874.40 Crores, as compared to 78,663 MT castings aggregating to Rs 734.21 Crores in the previous year.

During the year under review, KFIL achieved 100 percent capacity utilisation of Coke Oven plant, which was commissioned in March 2020. Coke consumption reduced during the year under review, as the coke was produced as per specification required for the furnaces. KFIL also installed conveyors from coke oven plants to mini blast furnaces to reduce handling loss. The 20MW power plant which works on waste heat recovery from coke oven plant, was commissioned in June 2020 and achieved 100 percent capacity utilisation by September 2020. This enabled KFIL to achieve substantial reduction in the power cost on account of captive consumption.

KFIL also received the permission from the Government to commence mining operations after completing necessary statutory clearances in respect of Kirloskar Bharat Mines. The permission so granted was valid to operate the mine upto 5 April 2021. KFIL is now in process to obtain renewal of forest agreement beyond 5 April 2021, to recommence the mining operations. KFIL extracted 98,600 MT of iron ore till 31 March 2021, but was unable to dispatch the same to its plants due to non-availability of road clearance in the forest area for transportation of mined iron ore.

The demand for Pig Iron from July 2020, onwards was strong from foundries supplying castings to tractor, steel, agriculture, pump and auto sector across India.

The demand for the casting was also strong during the year. The demand for the casting from the tractor industry was strong and kept on increasing till end of the Financial Year. The demand from heavy and medium Auto industry started picking up from second quarter and further improved in second half of the Financial Year. The increased demand for casting from Tractor, Auto, and Diesel Engine Industry enabled KFIL to scale up production by removing the bottlenecks and optimised load distribution between all three moulding lines. With such measures, KFIL achieved quarterly sale of 30,000 metric tons of casting in third and fourth quarter of the Financial Year.

During the year under review, iron ore prices increased substantially on account of lower availability against strong requirement from the domestic / global iron and steel industry. China was not interested in export of coke and as such started quoting higher prices which resulted in increased prices in Indian domestic market vis-a-vis export prices of coking coal from Australia remained subdued due to trade disagreement between China and Australia. Additionally, the cost of converted coke was lower and the selling price of pig iron was higher resulting in higher margins.

KFIL was able to source coal from Australia at economical prices. The timing of coke oven plant commissioning followed by subdued prices of coal gave substantial advantage in lower cost of coal to coke conversion as against sourcing of coke from market.

KFIL continuously worked on the improvement of the quality of the casting at both units of Koppal and Solapur, by reducing rejection rates.

KFIL added machining capacity and ramped up the machining capabilities to meet customer demand. Consequently, the sale of machined castings increased during the year as compared to previous year and KFIL was able to sell machined castings of around 11.5 percent.

KFIL has undertaken the following projects during the year under review:

• Initiated setting up new moulding line with contemporary technology with a capacity of 40,000 MT per annum at Solapur plant.

• Expanding machining capacity to add more value.

• Installation of Bell-less Top equipment for both the Mini Blast Furnaces (MBF) and up- gradation of MBF II and Pulvarised Coal Injection. All these Projects are expected to be completed in the Financial Year 2022-2023.

WELLNESS SPACE DEVELOPERS LIMITED

As mentioned above, Wellness Space Developers Private Limited (WSDPL) is a Wholly Owned Subsidiary of the Company which acquired the ‘Real Estate Business Undertaking at Kothrud of the Company on a going concern basis, by way of slump sale, by executing the Business Transfer Agreement by and between the Company and WSDPL on 19 December 2020.

Further, WSDPL was converted into a public limited company with effect from 17 March 2021, and is now called Wellness Space Developers Limited (WSDL).

Subsequent to the business transfer, the momentum of work speeded up with the lessening of the COVID-19 impact. WSDL achieved progress in design and project execution though the time lines, were impacted. The management of WSDL continues to periodically assess the impact of the pandemic on the business while abiding by the Rules and Regulations enforced by the Regulatory Authorities.

During the period under review, WSDL incurred a Loss Before Tax of Rs 1.04 Crores after providing 0.23 Crores towards depreciation.

L. DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS:

Details of significant changes, i.e., change of 25% or more, as compared to the immediately previous Financial Year in key financial ratio, along with detailed explanation thereof:

Sr. No. Particulars Ratio as on 31 March 2021 Ratio as on 31 March 2020 % of Change Explanations, if any
i. Debtors Turnover (in no. of days) 6 - - Refer Note no. 1
ii. Inventory Turnover (in no. of days) 2 - - Refer Note no. 2
iii. Interest Coverage Ratio - - - Refer Note no. 3
iv. Current Ratio 4.1 6.3 (34.90%) -
v. Debt Equity Ratio - - - Refer Note no. 4

Notes:

1. Debtors relate only to windmill business.

2. Inventory represents number of Renewable Energy Certificates (RECs) in stock obtained in respect of windmill business.

3. The Company does not have any interest cost.

4. The Company does not have any borrowings.

M. RETURN ON NET WORTH:

Details of change in Return on Net Worth as compared to the immediately previous Financial Year as follows:

Sr. No. Particulars Ratio as on 31 March 2021 Ratio as on 31 March 2020 % of Change Explanations, if any
1 Net worth 1.92% 7.10% (72.91%) Refer Note No. 1

Note:

1. Return on Net Worth has decreased since net profit has decreased and net worth has increased due to significant increase in fair market value of equity instruments from 31 March 2020 to 31 March 2021.

V. 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:

1. EXTRACT OF ANNUAL RETURN:

In terms of Section 92(3) read with Section 134 (3) (a) of the Companies Act, 2013, read with Rule 12 of the Companies (Management and Administration) Rules, 2014, including amendments thereunder, the Annual Return filed with the Ministry of Corporate Affairs (MCA), for the Financial Year 2019-2020, is available on the website of the Company, viz., www.kil.net.in and the Annual Return for the Financial Year 2020-2021, will be made available on the website of the Company once it is filed with the MCA.

2. NUMBER OF MEETINGS OF THE BOARD:

During the period under review, 5 Board Meetings were convened and held, the details of which form part of the Report on Corporate Governance. The intervening gap between the Meetings was within the period prescribed under the Companies Act, 2013.

3. DIRECTORS RESPONSIBILITY STATEMENT:

Pursuant to the requirements under Section 134 (5) of the Companies Act, 2013, 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 2021, the applicable accounting standards had been followed and there were no material departures;

b) accounting policies as mentioned in Note No. 2 of the Notes forming part of 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 2021 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 Act, 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 internal 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.

4. A STATEMENT ON DECLARATION BY 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 Rules thereunder including amendments thereto and Regulation 16 (1) (b) and 25 (8) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, including amendments thereto and also confirmed that they have complied with the Code for Independent Directors prescribed in Schedule IV to the Act.

Further, pursuant to Sub-rule (1) and (2) of Rule 6 of the Companies (Appointment and Qualifications of Directors) Rules, 2014 and amendments thereto, all Independent Directors confirmed that they have enrolled their name in the data bank with the Institute of Corporate Affairs, New Delhi, India, within prescribed time period.

The Company has laid down a Code for the Board of Directors and Senior Management of the Company (Code of Conduct). The Code of Conduct is available on the Companys website, viz., www.kil.net.in.

All the Board Members and Senior Management Personnel of the Company have affirmed compliance with the Code of Conduct.

5. COMPANYS POLICY ON DIRECTORS APPOINTMENT AND REMUNERATION:

The Board has on the recommendation of the Nomination and Remuneration Committee adopted a policy for selection and appointment of Directors, Key Managerial Personnel and Senior Management Personnel and their remuneration.

The Nomination and Remuneration Policy is available on the website of the Company, viz., www.kil.net.in.

6. AUDITORS:

a. Statutory Auditors:

G. D. Apte & Co., Chartered Accountants, (Firm Registration Number 100515W), Pune, who were appointed as the Statutory Auditors of the Company under Section 139 of the Companies Act, 2013, to hold the office for a second term of five years from the conclusion of the Annual General Meeting (AGM) held on 11 August 2016, till the conclusion of the AGM of the Company, to be held in the year 2021, will complete their term on the conclusion of the ensuing AGM of the Company.

G. D. Apte & Co., Chartered Accountants, hold the office as the Statutory Auditors till the conclusion of forthcoming AGM of the Company.

On the recommendation of the Audit Committee, subject to the approval of the members of the Company, the Board has approved the appointment of Kirtane and Pandit LLP, Chartered Accountants, (Firm Registration No. 105215W / W100057), Pune, as the Statutory Auditors of the Company, for a term of 5 consecutive years from the conclusion of the ensuing AGM to be held on 10 August 2021, till the conclusion of the AGM of the Company, to be held in the year 2026, along with the remuneration payable to Kirtane and Pandit LP, Chartered Accountants, for the Financial Year 2021-2022 and authorised the Board of Directors to increase and pay such statutory audit fees as they deem fit for the remaining tenure of their appointment.

The Company has received a certificate from Kirtane and Pandit LLLP, to the effect that the appointment as Statutory Auditor, if made, will be in accordance with the limit specified in Section 141 of the Companies Act, 2013.

The Board of Directors places on record its appreciation for the services rendered by G. D. Apte & Co., as the Statutory Auditors of the Company.

The necessary resolution seeking your approval to the appointment and remuneration of Kirtane and Pandit LLP, as the Statutory Auditors of the Company is appearing in the Notice convening the AGM of the Company.

b. Cost Auditors:

Pursuant to the Companies (Cost Records and Audit) Rules, 2014, dated 31 December 2014, the Company was not required to audit cost records relating to Electricity Industry (Windmills) for the Financial Year 2020-2021.

c. Secretarial Auditors:

Pursuant to the provisions of Section 204 of the Companies Act, 2013, and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 and Regulation 24A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company had appointed Mr. Mahesh J. Risbud, Practicing Company Secretary, (FCS 810 CP 185), Pune, to undertake the Secretarial Audit of the Company.

The Report of the Secretarial Audit is annexed as ‘Annexure II to this Report.

Mr. Mahesh J. Risbud, Practising Company Secretary, Pune, has submitted Secretarial Compliance Report as laid down in SEBI Circular CIR/CFD/CMD1/27/2019 dated 8 February 2019, and has also confirmed that the Company has complied with all applicable SEBI Regulations and circulars / guidelines issued thereunder, for the Financial Year 20202021.

7. MAINTENANCE OF COST RECORDS:

Pursuant to the Companies (Cost Records and Audit) Rules, 2014, dated 31 December 2014, the Company was not required to maintain cost records relating to Electricity Industry (Windmill) in Form CRA - 1 for the Financial Year 2020-2021.

8. EXPLANATION OR COMMENTS OF STATUTORY AUDITORS AND SECRETARIAL AUDITORS:

There are no qualifications, reservations or adverse remarks or disclaimer made by the Statutory Auditor in their Audit Report or by the Practicing Company Secretary in the Secretarial Audit Report for the year ended 31 March 2021.

The notes to the Accounts referred to in the Auditors Reports are self-explanatory and therefore no further clarifications are required.

9. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS UNDER SECTION 186 OF THE COMPANIES ACT, 2013:

During the period under review, your Company has given a loan of Rs 15 Crores to Wellness Space Developers Limited (WSDL), a Wholly Owned Subsidiary Company. Your Company has not granted any guarantee.

During the period under review, the Company has invested of 0.02 Crores in equity capital of WSDL.

10. 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 particulars of all 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 the Indian Accounting Standard 24 (IND AS 24) have been provided in Note No. 44 to the Financial Statements.

11. STATE OF COMPANYS AFFAIRS:

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

12. AMOUNTS PROPOSED TO BE CARRIED TO RESERVES:

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

13. MATERIAL CHANGES AND COMMITMENTS, BETWEEN THE DATE OF 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 this Report.

14. 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 and technology absorption as required under Section 134 (3) (m) of the Companies Act, 2013, read with Rules thereunder.

B. Foreign exchange earnings and outgo:

(Rs in Crores)

Particulars Amount
Foreign exchange earnings Nil
Foreign exchange Outgo Nil

15. 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 risk mitigating actions on a continuing basis. These are discussed at the meetings of the Audit Committee and the Board of Directors of the Company from time to time.

16. CORPORATE SOCIAL RESPONSIBILITY:

The Company has been carrying out Corporate Social Responsibility (CSR) activities. These activities carried out in terms of Section 135 read with Schedule VII of the Companies Act, 2013 and the Companies (CSR Policy) Rules, 2014.

Annual Report on CSR activities includes details about the CSR policy developed and implemented by the Company. CSR initiatives taken during the year is annexed as ‘Annexure III to this Report.

17. BOARD EVALUATION:

Pursuant to the provisions of the Companies Act, 2013, and Regulation 17 (10) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Board has carried out performance evaluation of its own performance and that of its committees and individual Directors. Performance evaluation has been carried out as per the criteria prescribed by the Nomination and Remuneration Committee.

18. PERFORMANCE AND FINANCIAL POSITION OF EACH OF THE SUBSIDIARIES,

ASSOCIATES AND JOINT VENTURE COMPANIES:

Name and Registered Office of the Subsidiary Company % Holding Particulars 2020-2021 Amount (Rs in Crores)
Kirloskar Ferrous Industries Limited, 13, Laxmanrao Kirloskar Road, Khadki, Pune 411 003 51.06 Total income 2,040.91
Profit before tax 363.19
Tax expenses 61.08
Profit for the year 302.11
Other comprehensive income for the year 0.86
Total comprehensive income for the period 301.25
Profit brought forward from previous year 390.92
Transfer from Share Options 0.15
Final Dividend paid on equity shares Nil
Tax on above Dividend NA
Interim dividend paid on equity shares (27.67)
Tax on above Dividend NA
Profit available for appropriation 664.65
Transfer to General Reserves (5.00)
Balance carried to surplus in the Statement of Profit and Loss 659.65
Name and Registered Office of the Subsidiary Company % Holding Particulars 2020-2021 Amount (Rs in Crores)
Wellness Space Developers Limited, Office No.801, 8th Floor, Cello Platina, Fergusson College Road, Shivajinagar, Pune 411 005 100 Total income 0.20
Profit before tax (1.04)
Tax expenses (including deferred tax) (0.06)
Profit for the year (0.98)
Other comprehensive income for the year (0.04)
Total comprehensive income for the period (0.04)
Profit brought forward from previous year Nil
Final Dividend paid on equity shares Nil
Tax on above Dividend Nil
Interim dividend paid on equity shares Nil
Tax on above Dividend Nil
Profit available for appropriation (0.98)
Transfer to General Reserves Nil
Balance carried to surplus in the Statement of Profit and Loss (1.02)
Name and Registered Office of the Associate Company % Holding Particulars 2020-2021 Amount (Rs in Crores)
# Kirloskar Brothers Limited, Yamuna, S. No. 98/3 to 7, Plot No. 3, Baner, Pune 411 045 23.91 Total income 1,174.50
Total expenditure 1,122.70
Profit before exceptional items and taxation 51.80
Profit before taxation 51.80
Provision for tax (including Deferred Tax) 12.90
Net profit 38.90
Other comprehensive income 3.00
Balance of Profit / (Loss) from previous year Not available
Dividend paid on equity shares Not available
Tax on above dividend Not available
Profit available for appropriation Not available
Transfer to General Reserve Not available
Balance carried to surplus in the Statement of Profit and Loss Not available

Note:

# The Company does not have significant influence on Kirloskar Brothers Limited (KBL) as it does not participate in the management and / or financial decisions of KBL. As such KBL is not an Associate Company of the Company under the IND AS 24 and as such its financials are not included in the Consolidated Financial Statements of the Company. Hence, the aforesaid information is obtained from the website of KBL for the quarter and nine months ended 31 December 2020.

19. CHANGE IN THE NATURE OF BUSINESS, IF ANY:

In Financial Year 2020-2021, there was no change in the nature of business of the Company.

20. DETAILS OF APPOINTMENT AND RESIGNATION OF DIRECTORS AND KEY MANAGERIAL PERSONNEL:

Directors appointed / re-appointed during the year:

Name of Director Designation Terms of Appointment
Mr. Mahesh Chhabria Managing Director Re-appointed w.e.f. 27 August 2020, subject to retirement by rotation.
Mr. Nihal Kulkarni Non-Executive Director Re-appointed w.e.f. 27 August 2020, subject to retirement by rotation.
Mr. Tejas Deshpande Independent Director Re-appointed w.e.f. 28 August 2020, as an Independent Director to hold office for a second term of 5 consecutive years with effect from 28 August 2020
Mr. Anil Alawani Non-Executive Director Continuation of Directorship as a Non-Executive NonIndependent Director after attainment of age of 75 years

* Mr. Mahesh Chhabria and Mr. Nihal Kulkarni retired by rotation and were re- appointed in the Annual General Meeting held on 27 August 2020.

Key Managerial Personnel appointed during the year:

During the period under review, there has been no change in the Key Managerial Personnel of the Company.

Directors and Key Managerial Personnel resigned during the year 2020-2021:

During the year under review, there has been no change in Directors and Key Managerial Personnel of the Company.

21. DIRECTORS PROPOSED TO BE APPOINTED / RE-APPOINTED AT THE ENSUING ANNUAL GENERAL MEETING:

Mr. Vinesh Kumar Jairath and Mr. Atul Kirloskar who retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment.

The Company has also received the requisite disclosures / declarations from Mr. Vinesh Kumar Jairath and Mr. Atul Kirloskar.

The brief resumes and other details relating to Directors who are proposed to be appointed / reappointed, as required to be disclosed under Regulation 36 (3) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, form part of the Statement setting out material facts annexed to the Notice of the Annual General Meeting.

The resolutions seeking approval of members for the appointment / re-appointment of these Directors have been incorporated in the Notice of the forthcoming Annual General Meeting of the Company.

22. NAMES OF THE COMPANIES WHICH HAVE BECOME OR CEASED TO BE ITS SUBSIDIARIES, JOINT VENTURES OR ASSOCIATE COMPANIES DURING THE YEAR:

The Company acquired 100% equity share capital of Wellness Space Developers Private Limited (WSDPL) on 19 December 2020. Consequently, WSDPL became a Wholly Owned Subsidiary Company of the Company. Further, WSDPL is converted into public company with effect from 17 March 2021.

23. DETAILS RELATING TO DEPOSITS, COVERED UNDER CHAPTER V OF THE COMPANIES ACT, 2013:

None

24. 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 order from the Regulators, Courts or Tribunals during the year, which may impact the going concern status or the Companys operation in future.

25. DETAILS IN RESPECT OF ADEQUACY OF INTERNAL FINANCIAL CONTROL 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 / Vigil Mechanism, rigorous management review and Management Information System (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 the Management oversees results of the internal audit and reviews implementation on a regular basis.

26. COMPOSITION OF THE AUDIT COMMITTEE:

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

VI. INFORMATION FORMING PART OF THE BOARDS REPORT PURSUANT TO RULE 5 OF THE COMPANIES (APPOINTMENT AND REMUENRATION 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 as ‘Annexure IV to this Report.

The particulars of top ten employees pursuant to the aforesaid Rules form part of this Report. In terms of Section 136 (1) of the Companies Act, 2013, the Boards Report is being sent to the members without this Annexure. The members interested in obtaining a copy of this Annexure may write to the Company Secretary at the Companys Registered Office.

VII. VIGIL MECHANISM:

The Company has a Whistle Blower Policy / Vigil Mechanism (the Policy) to deal with instances of fraud, unethical behavior, etc. The Policy provides 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 or ethics policy or leakage of Unpublished Price Sensitive Information (UPSI), by any person, who is in possession of UPSI, to any other person in any manner whatsoever, except as otherwise permitted under the SEBI (Prohibition of Insider Trading) Regulations, 2015, or any other instance to the Chairman of the Audit Committee of the Board of Directors of the Company. The Policy is placed on the Companys website, viz., www.kil.net.in.

VIII. DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013:

During the period under review, the Company has complied with the provisions relating to the constitution of Internal Committee (the Committee) under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

The Committee comprises four members including one external member.

During the period under review, four meetings of the Committee were held on 20 May 2020, 5 August 2020, 15 October 2020 and 19 January 2021.

The Company has in place a Policy for Prevention of Sexual Harassment at workplace. This would, inter alia, provide a mechanism for the resolution, settlements or prosecution of acts or instances of sexual harassment at workplace and to ensure that all employees are treated with respect and dignity.

The details of complaints filed, disposed off and pending during the Financial Year pertaining to sexual harassment is provided in the Business Responsibility Report of this Report.

IX. CASH FLOW:

A Cash Flow Statement for the year ended 31 March 2021, is attached to the Balance Sheet as a part of the Financial Statements.

X. COMPLIANCES WITH RESPECT TO APPLICABLE SECRETARIAL STANDARDS:

During the period under review, the Company has complied with all the applicable secretarial standards.

XI. CORPORATE GOVERNANCE:

In terms of Regulation 34 (3) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, a Report on the Corporate Governance along with the Compliance Certificate issued by the Statutory Auditors of the Company is attached and forms part of the Annual Report.

XII. REMUNERATION RECEIVED BY THE MANAGING DIRECTOR / EXECUTIVE DIRECTOR FROM SUBSIDIARY COMPANIES:

Sr. No. Name of Director Designation Remuneration received / receivable from Kirloskar Ferrous Industries Limited, Subsidiary Company (Rs in Crores) Remuneration received /receivable from Wellness Space Developers Limited, Wholly Owned Subsidiary Company (Rs in Crores)
1 Mr. Mahesh Chhabria Managing Director 0.599 Nil
2 Ms. Aditi Chirmule Executive Director Nil Nil

XIII. BUSINESS RESPONSIBILITY REPORT (BRR):

The Regulations mandate the inclusion of the BRR as part of the Annual Report for top 1000 listed entities based on market capitalisation. In compliance with the Regulations, the Company has integrated BRR disclosures into the Annual Report.

ACKNOWLEDGEMENTS:

Your Directors would like to place on record their appreciation of the contribution made and support provided to the Company by the members, employees and bankers, during the year under Report.

For and on behalf of the Board of Directors
Pune: 15 May 2021 ATUL KIRLOSKAR
CHAIRMAN
DIN 00007387