kirloskar industries ltd Directors report

for Financial Year 2022-2023

To The Members,

The Directors have pleasure in presenting this 29^th Annual Report with the Audited Annual Accounts of the Company for the year ended 31 March 2023.

I. FINANCIAL PERFORMANCE (STANDALONE):
		(Rs in Crores)
Particulars	2022-2023	2021-2022
	~
Total Income	118.33	102.67
Total Expenditure	24.91	22.57
Profit before exceptional items and taxation	93.42	80.10
Profit before taxation	93.42	80.10
Provision for tax (including Deferred Tax)	19.33	19.25
Net Profit	74.09	60.85
Balance of Profit / (Loss) from previous year	592.82	541.66
Less: Re-measurement of defined benefit plans (net of Taxes)	(0.12)	0.02
Add: Transfer from Other Comprehensive Income on account of sale of shares	295.66	-
of Swaraj Engines Limited
Dividend paid on equity shares:
Final Dividend	9.81	9.71
Profit available for appropriation*	952.64	592.82
Balance carried to Surplus in Statement of Profit and Loss	952.64	592.82

II. DIVIDEND:

Y our Directors recommend 110 % dividend,H i.e., 11 per equity share of H 10 each (Previous year dividend 100%, i.e., H 10 per equity share of H 10 each) for the Financial Year ended 31 March 2023.

In terms of Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements), Regulations, 2015, including amendments thereunder, the Company has adopted the Dividend Distribution Policy. A copy of the same is available at the website of the Company, viz. www. kirloskarindustries.com.

III. CLA SSIFICATION OF THE COMPANY AS

UNREGISTERED CORE INVESTMENT COMPANY (CIC):

The Company is an ‘Unregistered CIC regulated by the Reserve Bank of India (RBI), which cannot access public funds and is complying with all the regulations required for an ‘Unregistered CIC.

IV. MANA GEMENT DISCUSSION AND

REPORT:

A OPERATIONS OF THE COMPANY:.

WINDMILLS:

The Company has seven Wind Energy Generators (WEGs) in Maharashtra with a 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 0.84 Crores units of electricity in the period under review as against 0.82 Crores units of electricity in the previous year showing an increase of 2.38 % over the previous year. During the year under review and till the date of this Report, all WEGs were operational at desired Prime Load Factor.

The Company has obtained Open Access Permission from Maharashtra State Electric Distribution Company Limited (MSEDCL) and is selling the wind power units generated to a leading electric power distribution company which has ensured regular monthly revenue realisation. All windmills are registered with the National Load Despatch Centre (NLDC) and are eligible for the Renewable Energy Certificates (RECs). During the year, the Company has also sold 8,174 RECs, which has resulted in revenue of H 0.82 Crores (previous year H 0.88 Crores). The Company is holding 8,226 unsold RECs as on 31 March 2023. Themanagementhasdecidedtofocusonitsrealestate business and that of its wholly-owned subsidiary and optimize returns on its investment portfolio. In view of the same, the management is desirous of monetizing its assets through the sale and transfer of its Windmill Business on a going concern basis, in compliance with the provisions of the Companies Act, 2013 and other applicable laws.

In view of the same, the Audit Committee and the Board has considered and approved the sale of the windmills business of the Company to ISMT Limited, a related party of the Company subject to the requisite governmental, statutory and regulatory approvals, required to be obtained by the Company and / or purchaser, as applicable, including but not limited to the approval from the Ministry Energy Development Agency (MEDA) and Maharashtra State Electricity Distribution Company Limited (MSEDCL), as the case maybe, for consummating the said transaction, in its meeting held on 23 May 2023.

REAL ESTATE ACTIVITIES:

The Company had entered into a Business Transfer Agreement (BTA) with Avante Spaces Limited (Avante) in 2020.

In terms of the BTA, Avante had allotted 6,00,00,000 Unsecured Optionally Convertible Debentures (OCDs) of H 10/- each to the Company, for a consideration other than cash amounting to H 60,00,00,000 (Rupees

Sixty Crores Only).

The OCDs were convertible at the discretion of the Avante. The Board of Directors of Avante in its meeting held on 25 April 2023, approved the conversion of 6,00,00,000 OCDs of H 10 each into 27,24,868 fully paid equity shares of Avante of face value of H 10/- each at the price / value of H 253.64 per share, subject to compliance with the applicable provisions of the Companies Act, 2013.

Your Company transferred its ‘Real Estate Business Undertaking at Kothrud on a going concern basis by way of a ‘Slump Sale to ASL, for a lump sum consideration of H75 Crores, by executing the Business

Transfer Agreement (BTA) in December 2020. ASL has made good progress in the last three years on the multi-use project development in Kothrud. The WIP on the books of Avante is over H 283 Crores and it has sold 1.19 lakh sq. ft. area in "One Avante" commercial project for H 233 Crores. Thus, assets adjusted for all the liabilities are now valued at H 190.48 Crores and per share value is H 253.64 per share.

The Audit Committee and the Board of Directors have considered the proposal of Avante for conversion of the unsecured OCDs into fully paid equity shares of Avante in their respective meeting held on 23 May 2023, the Company will hold 1,02,34,868 equity shares of Avante with a face value of H 10/- each.

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 H 27.19 Crores (H 27.08 Crores as on 31 March

2022). We are assessing the leased asset portfolio from monetization and potential development opportunities.

The Company was the promoter of Swaraj Engines Limited (SEL) along with Mahindra & Mahindra Limited (M&M) which held 42,16,792 equity shares representing 34.70% of the paid-up capital of SEL. Since M&M controlled the business of SEL and the equity shares of SEL were not part of the core holding of the Company and were illiquid, the Company decided to divest its shareholding in SEL by selling it through an off market transaction to M&M.

The Company sold its entire shareholding, i.e., 21,14,349 equity shares representing 17.41% of the paid-up equity share capital of SEL, to M&M at a price of Rs 1,400 per equity share amounting to an aggregate of approximately Rs 296 crores and booked a profit of H 278 crores. This transaction was an off-market inter se transfer between the promoters under Regulation 10(1)(a)(ii) of the SEBI (Securities and Exchange Board of India (SEBI) (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.

The Company has also applied for re-classification of the Company from "Promoter" Category to "Public" category shareholder of SEL pursuant to the provisions of Regulation 31A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, (the Regulations).

The Company holds only 683 equity shares of Cummins India Limited (Cummins) and the Company has applied for re-classification of the Company from "Promoter" category to "Public" category shareholder of Cummins pursuant to the provisions of Regulation 31A of the Regulations.

The Company invested H 78.28 Crores to acquire 4.99% stake in ISMT Limited. (step-down subsidiary of your Company being a subsidiary of KFIL which is a subsidiary of your Company). The Company continues to invest its surplus funds in fixed deposits and mutual funds. These investments stood at H 223.03 Crores as on 31 March

2023 (previous year H 11.83 Crores). The Company being CIC, the Company can deploy these funds only in investment in group companies and / or towards real estate business directly or through its subsidiary.

B. RAISING OF FUNDS THROUGH PREFERENTIAL

ALLOTMENT

On the recommendations of the Audit Committee and with the approval of the Board, the members of the Company approved the Special Resolution set out in the Notice of Postal Ballot dated 27 February 2023 read with Corrigendum dated 15 March 2023, for the allotment of 4,55,580 Warrants Convertible into Equity Shares (2,27,790 Warrants to Mr. Atul Kirloskar and 2,27,790 Warrants Mr. Rahul Kirloskar (Allottees) at a price of H 2,195 each) on 29 March 2023.

The Allottees have the option to convert the Warrants into an equal number of Equity Shares within 18 months from the date of allotment.

Post receipt of required approvals for issuance of aforesaid securities, the Stakeholders Relationship Committee in its meeting held on 27 April 2023, allotted 4,55,580 Warrants Convertible into Equity Shares (2,27,790 Warrants to Mr. Atul Kirloskar and 2,27,790 Warrant Mr. Rahul Kirloskar at a price of H 2,195 each). The Allottees have paid

25% of the issue price amounting to H 12.50 Crores each and the balance of 75% amounting to H 37.49 Crores each of the issue price of the Warrants is payable on or before the exercise of the right to subscribe for shares attached to the warrants within 18 months from the date of allotment. Upon receipt of the balance 75% of the issue price, the Warrants shall be converted into Equity Shares having face value of H 10/- each.

C. COMPANY PERFORMANCE:

During the year under review, your Company earned a total income of H 118.33 Crores (previous year H 102.67

Crores).

During the year under review, the Company received total dividend of H 68.72 Crores (previous year H 65.70

Crores) declared by the investee companies.

The Profit Before Tax (PBT) is at H 93.42 Crores

(previous year H 80.10 Crores). The substantial increase in the PBT is mainly due to the receipt of the dividend on its investments at a higher rate.

D. HUMAN RESOURCES:

As on 31 March 2023, the Company had 28 employees (previous year 25 employees) on its roll including employees of its wholly-owned subsidiary company. It includes the Managing Directors and the Executive Director.

E. KIRLOSKAR INDUSTRIES LIMITED – EMPLOYEES STOCK APPRECIATION RIGHTS PLAN 2019:

The ‘Kirloskar Industries Limited – Employees Stock Appreciation Rights Plan 2019 (KIL ESARP 2019) was introduced in accordance with the SEBI guidelines for the employees of the Company and its subsidiaries. The Company 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), read with, SEBI (Share Based Employees Benefits and Sweat Equity Regulations, 2021)

(Employee Benefits Regulations) and other applicable Regulations. A certificate from Mr. Mahesh J. Risbud, Practicing Company Secretary, (FCS 810 CP 185), Pune, Secretarial 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, and further amended by the Board of Directors in its meeting held on 3 February 2022. A copy of the same will also be available for inspection at the Companys Registered Office.

Under the KIL ESARP 2019, the Company has granted to date a total of 4,84,498 Equity Settled Stock Appreciation Rights (ESARs) at an exercise price of H 500 per ESAR to eligible employees including the

Managing Director, the Executive Director, a Non-Executive Director of the Company and employees of Avante Spaces Limited, a wholly-owned subsidiary company of the Company.

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.

During the year under review, the Company granted 37,600 ESARs to eligible employees and the Non-Executive Director of the Company under the KIL ESARP 2019.

During the year under review, the Company had vested 1,18,289 ESARs, in the employees of the Company, including the Managing Director and Executive Director; and in the Non-Executive Director of the Company, who is the Managing Director of Avante to whom ESARS were granted under the KIL ESARP 2019.

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 2023, are set out in ‘Annexure I to this Report and are available on the Companys website at www.kirloskarindustries.com.

The members of the Company approved the amendment to the KIL ESARP 2019 by increasing Employee Stock Appreciation Rights (ESARs) by 3,00,000 from 4,85,000 ESARs to 7,85,000 ESARs to the existing ESAR pool and the amendment of Clause 8.1 of the KIL ESARP 2019, changing the percentage of discount from 40% to 50%.

F. CONCERNS AND THREATS:

The Board of Directors has 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.

The Company has deployed a risk management process that includes risk identification, 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.

G. PROSPECTS:

The real estate sector has performed remarkably in the last financial year and even the elevated inflation and recent interest rate hikes have not shown any major impact on the real estate sector. We see marked improvement in the prospects of real estate as volume and pricing is witnessing an uptick across geographies. While commodity price inflation is a short-term risk, we believe the improving dynamics of real estate will offset the headwind from rise in commodity prices.

The sector is likely to continue to strengthen in the quarters ahead and we will be focused on opportunities for development of own land parcels and new project acquisitions. A consolidation in the real estate sector is expected to continue, leading to an increase in the market share of branded organized players such as your Company.

Your company will be guided by superior long-term shareholder value growth in all its endeavours by maximizing returns through timely execution, optimal financing and fiscal discipline.

H. INTERNAL CONTROLS SYSTEM AND THEIR ADEQUACY:

The Company has in place an adequate internal controls system to ensure operational efficiency, accuracy, and promptness in financial reporting and compliance with 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.

I. 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.

J. SEBI REGULATIONS AND LISTING FEES:

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

K. 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 50.84% of its total shareholding as on 31 March 2023.

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

L. SUBSIDIARY COMPANY AND CONSOLIDATED FINANCIAL

STATEMENTS:

As on 31 March 2023, the Company has the following subsidiaries:

1. Avante Spaces Limited, a Wholly-owned Subsidiary Company;

2. Kirloskar Ferrous Industries Limited (KFIL), Subsidiary Company; and

3 . ISMT Limited, a subsidiary of the Subsidiary Company (a subsidiary of KFIL).

The Consolidated Financial Statements of the Company and its subsidiaries, prepared in accordance with IND AS 110, issued by the Ministry of Corporate Affairs, form 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 and its Rules thereof including amendments thereunder, the Financial Statements along with relevant documents of the Company and its subsidiaries, are available on the Companys website, viz., www.kirloskarindustries.com.

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:

AVANTE SPACES LIMITED:

Avante Spaces Limited (Avante), a Wholly-Owned Subsidiary of the Company, embarked on the mixed-use development of the land parcel in Kothrud, Pune in the year 2020 and has continued to make satisfactory progress considering the challenges involved in the development of any area in the main city centre or a prime locality.

Avantehasputstrongemphasisontheenvironmentally and socially responsible actions while continuing to create world class spaces and redefine / uplift the overall locality. It has received a pre certification of ‘Platinum Rating from Indian Green Building Council (IGBC) for its first project ‘One Avante. The term "Platinum IGBC Green Building Rating" refers to the highest level of certification awarded by the IGBC for green buildings in India.

Avante obtained registration under the Real Estate (Regulations and Development) Act, 2016, (RERA) and has sold some parts of under construction units in the "One Avante Project". The sale has allowed Avante to fund balance work on the Project and also prepay the construction finance facility availed from ICICI Bank. Avante is on course to recognize revenue and profits in the next financial year.

Avante is continuing with its objective of all round development of the Kothrud land parcel. With the construction of the first Project nearing completion, Avante is now focused on the second projects planning and execution. The second project is significantly larger and it will redefine the Kothrud, Pune area from prime residential area into a Central Business District for commercial spaces.

Avantes agile management, disciplined approach and emphasis on strong corporate governance are key strengths that will help it to build avant-garde spaces and a successful presence in the real estate industry.

KIRLOSKAR FERROUS INDUSTRIES LIMITED: Kirloskar Ferrous Industries Limited (KFIL) is in the business of manufacture of pig iron and castings and has its manufacturing facilities located at Bevinahalli village and Hiriyur in Karnataka and Solapur in Maharashtra.

During the year under review:

KFIL achieved Net Sales of H 4,194.42 Crores as compared to H 3,614.97 Crores in the previous year. The Profit Before Tax for the year under review stood at H 472.03 Crores as compared to H 542.69 Crores of the previous year after providing for depreciation and amortisation.

• KFIL maintained the market leadership position in the domestic casting business, which recorded a sales value growth of 30 percent and volume growth of 14 percent over previous year, with substantial capacity utilisation improvement coupled with higher share of critical castings and improved quality in Foundry.

• The Pig Iron business achieved a sales growth of 8 percent over the previous year in spite of marginal reduction of volume by 3 percent on account of shutdown of furnaces for upgradation and maintenance.

KFIL sold 4,80,472 MT of pig iron valued at H 2374.20 Crores (which includes 134,651 MT from its Hiriyur plant) during the financial year 2022–2023 as compared to 4,95,555 MT of pig iron valued at H 2,201.77 Crores in the previous financial year. The demand for all the grades of pig iron was good across the sectors throughout the year under review. The average realisation of pig iron for the year was around H 49,500 per MT as against H 44,500 per MT in the previous year.

KFIL sold 1,30,345 MT of castings aggregating to H 1673.26 Crores during the financial year 2022–2023 as compared to 1,14,342 MT castings aggregating to H 1,289.63 Crores for the previous financial year. The fluctuation in the coal prices were mitigated by continuous monitoring of the International coal prices and timely booking of coal through spot pricing and optimising the coal blend. The coke oven phase I and Power plant there to was operated throughout the year, which contributed to the cost reduction. Further, KFIL also entered into agreement for converting the coal to coke, which helped the company to mitigate from price fluctuation of coke.

Upgradation of MBF 1 and MBF 2 helped in improving productivity and reduction in coke consumption. 100 percent consumption of Captive Power helped in optimising overall cost.

KFIL maintained the leadership position in the domestic market in the block and head category. KFIL also improved the market leadership position in the category for supply of critical castings.

During the year under review, the production of castings increased by 12 percent when compared to the previous year.

KFIL continuously worked on improving the casting sales volume growth, quality and manufacturing cost at both Koppal and Solapur plants.

KFIL achieved the lowest casting rejection of 5 percent during the year.

During the year under review, KFIL was successful in adding two new Global OEM customers and increase in share of business from current customers. KFIL also increased the supply of machined castings and also successful in obtaining new orders in machined condition.

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

• Upgradation of MBF-2 at Koppal location in July 2022 helped to increase the production capacity of Pig Iron by 37,600 MT per annum.

• KFIL commenced the operation of its Coke oven phase II in February 2023. This enhanced the capacity of the coke production from 2 lakhs MT per annum to 4 lakhs MT per annum.

• 20MW power plant attached to Coke oven Phase II was commenced in March 2023. This will help in the reduction of Power cost.

• The new moulding line at Solapur (Phase I) started Commercial production in Mar 2023, thereby increasing the capacity of production of castings by 20,000 MT per annum.

• De-bottlenecking projects and machining capacity expansion projects were undertaken in Foundry

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

• Installation of Pulvarised Coal Injection into Mini Blast Furnaces with Oxygen enrichment facility for cost reduction.

• Bell less top for MBF 1 at Koppal plant to reduce coke consumption.

• Solar Power plant at Solapur plant to reduce the cost of power for improving profitability.

• New Moulding line (Phase II) at Solapur plant for increasing the castings capacity by 20,000 MT.

• Expanding machining capacity based on customer requirements.

The Board of Directors of KFIL declared an interim dividend of H 2.50 (50 percent) per equity share of H 5 each on 7 February 2023 and paid on 3 March 2023.

The Board of Directors of KFIL in its meeting held on 12 May 2023 has also recommended a final dividend of H 3 (60 percent) per equity share of H 5 each for the Financial Year ended 31 March 2023. Accordingly, the total dividend (inclusive of interim dividend declared and paid) for the Financial Year 2022-2023 is 110 percent.

ISMT Limited (ISMT)

KFIL has acquired sole control over ISMT Limited on 10 March 2022, by acquiring 15,40,00,000 equity shares of H 5 each of ISMT Limited (i.e., 51.25 percent) through preferential allotment pursuant to terms of the Share Subscription Agreement dated 25 November 2021, executed between KFIL, ISMT Limited and certain promotes forming the promoter group of ISMT Limited. Consequent to the aforesaid allotment of equity shares ISMT Limited has become a subsidiary of KFIL with effect from 10 March 2022, pursuant to the provisions of Section 2 (87) (ii) of the Companies Act, 2013.

Further, KFIL has also acquired 5,747 equity shares of H 5 each of ISMT Limited, for an aggregate consideration of H 1,83,390 on 8 April 2022, through open offer pursuant to the provisions of the SEBI (Substantial Acquisition of Shares and takeover) Regulations, 2011.

The Board of KFIL and ISMT approved the Scheme of Arrangement and Merger between ISMT (Transferor Company), KFIL (Transferee Company) and their respective shareholders. The Scheme is subject to receipt of necessary statutory and regulatory approvals. Upon the Scheme becoming effective, 17 fully paid up equity shares of face value of H 5 each of KFIL will be allotted for every 100 fully paid up equity shares of face value of H 5 each of ISMT.

ISMT has a steel production facility at Jejuri in Maharashtra and seamless tube and pipes manufacturing units at Ahmednagar and Baramati in Maharashtra.

The acquisition of ISMT has facilitated KFIL to enter the business segment of steel manufacturing and seamless tubes.

During the year under review:

ISMT Management has been able to stabilize and streamline the operations within first year of acquisition by KFIL. ISMT achieved total income of H 2598.18 Crores as compared to H 2182.03 Crores in the previous year. The Profit Before Tax (before exceptional items) for the year under review stood at H 155.02 Crores as compared to H 5.53 Crores of the previous year.

M. 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 therefor:

S r. No.	Particulars	Ratio as on 31 March 2023	Ratio as on 31 March 2022	% of Change	Explanations, if any
		~
i.	Debtors Turnover (in no of days)	14	32	(55.52)	Refer Note NO.1
ii.	Inventory Turnover (in no. of days)	1	1	-	Refer Note NO.2
iii.	Interest Coverage Ratio	-	-	-	Refer Note NO.3
iv.	Current Ratio	14.06	1.19	1084.78	Refer Note NO.4
v.	Debt Equity Ratio	-	-	-	Refer Note NO.5

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. Part of the sale proceeds from Swaraj Engins Limited shares have been invested in Mutual Funds and Fixed Deposits.

5. The Company does not have any borrowings.

There are no sector-specific equivalent ratios for disclosure by the Company.

N. RETURN ON NET WORTH:

Details of change in return on net worth as compared to the immediately previous Financial Year as follows:

S r. No.	Particulars	Ratio as on 31 March 2023	Ratio as on 31 March 2022	% of Change	Explanations
1	Net worth	3.38	3.77	(10.28)	Refer Note No. 1

Note:

1. Return on net worth has decreased in spite of increase in net profit due to increase in Net worth on account of sale of shares of Swaraj Engines Limited., an amount of H 295.66 Crores is transferred from OCI to Profit and Loss account in the year ended 31 March 2023.

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 the provisions of Section 92(3) read with the provision of 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 2021-2022, is available on the website of the Company, viz., www.kirloskarindustries. com and the Annual Return for the Financial Year 2022-2023, 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 year under review, 7 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 2023, 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 2023 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 (7) 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 Indian Institute of Corporate Affairs, New Delhi, India, within prescribed time period.

In the opinion of the Board, each of the Independent Director appointed / re-appointed during the year under review possess requisite integrity, expertise, and experience for acting as an Independent Director of the Company.

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.kirloskarindustries. com.

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. kirloskarindustries.com.

6. AUDITORS:

a. Statutory Auditors:

Kirtane and Pandit LLP, Chartered Accountants, (Firm Registration Number 105215W), Pune, were appointed as the Statutory Auditors of the Company under Section 139 of the Companies Act, 2013, (the Act) to hold office for a term of five years from the conclusion of the Annual General Meeting (AGM) held on 10 August 2021, till the conclusion of the AGM of the Company, to be held in the year 2026.

The Company has received a certificate from the Statutory Auditors to the effect that they are fulfilling requirements prescribed under the provisions of Section 141 of the Act.

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 for the Financial Year 2022-2023.

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 2022-2023.

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 2022-2023.

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 2023.

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 year under review, your Company has given a loan of H 181.45 Crores to Avante Spaces Limited

(Avante), a Wholly Owned Subsidiary Company. Your Company has not granted any guarantee.

During the year under review, the Company acquired 1,50,00,000 equity shares of face value of H 5 each of

ISMT Limited (ISMT) representing 4.99% of the paid-up equity share capital of ISMT through the market, for a total consideration of H 78,27,70,474.

10. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES REFERRED TO IN SUBSECTION (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. 43 to the Financial Statements.

None of the related party transactions entered into by the Company, were materially significant, warranting members approval under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, including amendments thereunder. The Policy on related party transactions is available on the website of the Company, viz. www.kirloskarindustries.com.

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:

The Company has decided to divest the windmill business as detailed in para IV (a) above.

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 thereof including amendments thereunder.

B. Foreign exchange earnings and outgo:

Particulars	Amount
Foreign exchange earnings	Nil
Foreign exchange Outgo	0.02

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 Risk Management Committee, Audit Committee, and the Board of Directors of the Company from time to time.

The risk management process works at various levels across the organization. It is an ongoing process and forms an integral part of management focus.

16. CORPORATE SOCIAL RESPONSIBILITY:

The Company has been carrying out Corporate Social Responsibility (CSR) activities. These activities are 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 are 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 a 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.

1 PERFORMANCE8. AND FINANCIAL POSITION OF EACH OF THE SUBSIDIARIES, ASSOCIATES, AND JOINT VENTURE COMPANIES:

Name and Registered Office of the Subsidiary Company	% Holding	Particulars	2022-2023 Amount
Avante Spaces Limited,	100	Total income	6
Office No. 801, 8th Floor, Cello		Profit / (Loss) before tax	(390)
Platina, Fergusson College		Tax expenses (including deferred tax)	(72)
Road, Shivajinagar, Pune 411		Profit / (Loss) for the year	(318)
005		Other comprehensive income for the year	(20)
		Income Tax expenses/(reversal)	(5)
		Total comprehensive income for the period	(15)
		Profit / (Loss) brought forward from previous year	(486)
		Final Dividend paid on equity shares	Nil
		Tax on above Dividend	Nil
		Profit / (Loss) available for appropriation	(819)
		Transfer to General Reserves	Nil
		Balance carried to surplus / (deficit) in the Statement of	(819)
		Profit and Loss

Name and Registered Office of the Subsidiary Company	% Holding	Particulars	2022-2023 Amount
			(Consolidated)
			~~
Kirloskar Ferrous Industries	50.84	Total income	6,466.78
Limited, 13, Laxmanrao		Profit before tax	616.99
Kirloskar Road, Khadki,		Tax expenses	179.66
Pune 411 003		Profit for the year	437.33
		Other comprehensive income for the year	0.93
		Total comprehensive income for the period	438.26
		Profit brought forward from previous year	926.11
		Final Dividend paid on equity shares	41.66
		Interim dividend paid on equity shares	34.73
		Transfer to General Reserves	5
		Balance carried to surplus in the Statement of Profit and Loss	1,240.87

Name and Registered Office of the Associate Company	% Holding	Particulars	2022-2023 Amount (Standalone)
# Kirloskar Brothers Limited,	23.91	Total income	2,572.90
Yamuna, S. No. 98/3, to 7,		Total expenditure	2,351.70
Plot No. 3, Baner, Pune 411		Profit before exceptional items and taxation	221.2
045		Profit before taxation	207.30
		Provision for tax (including Deferred Tax)	54.70
		Net profit	152.60
		Other comprehensive income	(2.50)
		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	Not available
		and Loss

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 year ended 31 March 2023.

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

In Financial Year 2022-2023, 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. Anil Alawani	Director	Re-appointed with effect from 9 August 2022, subject to retirement by rotation.
Ms. Aditi Chirmule	Executive Director	Re-appointed as the Executive Director of the Company with effect from 25 January 2022.
Mr. Mahesh Chhabria	Managing Director	Re-appointed as the Managing Director of the Company with effect from 4 July 2022.
Mr. Vijaydipak Varma	Independent Director	Appointed as an Independent Director of the Company with effect from 15 October 2021 to hold office for a period of 5 years.
Ms. Purvi Sheth	Independent Director	Appointed as an Independent Director of the Company with effect from 27 May 2022 to hold office for a period of 5 years.
Mr. D. Sivanandhan	Independent Director	Re-appointed as an Independent Director of the Company to hold office for a second term upto his attaining the age of 75 years, i.e., upto 2 February 2026 with effect from 11 May 2022.
Mr. Ashit Parekh	Independent Director	Re-appointed as an Independent Director of the Company with effect from 4 July 2022 for a period of 5 years.
Mr. Satish Jamdar	Independent Director	Re-appointed with effect from 17 May 2023, as an Independent Director of the Company to hold office for a second term up to his attaining the age of 75 years i.e., up to 8 May 2027, with effect from 17 May 2023, subject to the approval of the members at the ensuing Annual General Meeting.

Key Managerial Personnel appointed during the year:

During the year under review, the Company appointed Mr. Anandh Baheti, Chief Financial Officer as a Key Managerial Personnel, with effect from 14 July 2022.

Directors and Key Managerial Personnel resigned during the year 2022-2023:

During the year under review, Mrs. Mrunalini Deshmukh ceased to be a Director of the Company with effect from 27 May 2022.

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

Mr. Mahesh Chhabria (DIN 00166049) who retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment.

The Company has received the requisite disclosure / declaration from Mr. Mahesh Chhabria.

Upon the recommendation of the Nomination and Remuneration Committee, the Board of Directors has sought the approval of the members for the reappointment of Mr. Satish Jamdar (DIN 00036653), as Independent Director to hold office for a second term up to his attaining the age of 75 years, i.e., upto 8 May 2027, with effect from 17 May 2023.

In the opinion of the Board of Directors, Mr. Satish Jamdar fulfills the conditions specified in the Companies Act, 2013 (the Act) and Rules thereunder and possess high integrity, repute, requisite expertise and experience (including the proficiency) so as to enable the Board to discharge its functions and duties effectively and he is independent of the management.

Mr. Satish Jamdar is exempted from passing the online proficiency test.

The Company has also received requisite disclosures / declarations from Mr. Satish Jamdar under Section 149 of the Act and other applicable provisions of the Act, and the Regulations and its amendments thereunder.

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 Regulations, form part of the Statement settling out material facts annexed to the Notice of the Annual General Meeting.

The resolutions seeking approval of the 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:

None

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 AND OTHER COMMITTEES OF THE BOARD:

Details of composition of committees of the Board, viz. Audit Committee, Nomination and Remuneration Committee, Stakeholders Relationship Committee and Corporate Social Responsibility Committee are provided in the Report on Corporate Governance.

27. No case of any fraud by any officer or employee of the Company has been reported by any auditor of the Company either to the Audit Committee or the Board pursuant to provisions of Section 143(12) of the Companies Act, 2013.

28. Neither any application has been made or any proceeding has been pending against the Company under the Insolvency and Bankruptcy Code, 2016.

29. The Company has not accepted any public deposit pursuant to the provisions of the Companies Act, 2013 and Rules thereof.

VI. INF ORMATION FORMING PART OF THE BOARDS

REPORT PURSUANT TO RULE 5 OF THE COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014:

The r elevant 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.kirloskarindustries. com. No case was filed during the year.

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

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

During the year under review, the Company has complied with the provisions relating to the constitution of the

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 year under review, four meetings of the Committee were held on 16 May 2022, 5 July 2022, 3 October 2022, and 5 January 2023.

During the year under review, there was no complaint / case filed / pending with the Company.

IX. CASH FLOW:

A Cash Flow Statement for the year ended 31 March 2023, is attached to the Balance Sheet as a part of the Financial Statements.

X. COMPLIANCES WITH RESPECT TO APPLICABLE SECRETARIAL STANDARDS:

During the year 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 a 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 Avante Spaces Limited, Wholly- Owned Subsidiary Company (Rs in Crores)
1	Mr. Mahesh Chhabria	Managing Director	0.43	Nil
2	Ms. Aditi Chirmule	Executive Director	Nil	Nil

XIII. BUSINESS RESPONSIBILITY REPORT (BRR):

Pursuant to provisions of Regulations 34(2)(f) of the Regulations, the Business Responsibility and Sustainability Report forms part of this 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.