MANAGEMENT DISCUSSION AND ANALYSIS REPORT:
A. OPERATIONS OF THE COMPANY:
WINDMILLS:
The Company has seven windmills in Maharashtra with total installed capacity of 5.6
Megawatt (MW). The windmills are located at Tirade Village, Tal. Akole, Dist. Ahmednagar.
The windmills have generated net wind energy of 49.05 Lakh units of electricity in the
year under review as against 89.93 Lakh units of electricity in the previous year showing
decrease of 54% over the previous year.
During the year under review, generation of units from the windmills has gone down due
to various reasons viz., major break down of one Wind Energy Generator (WEGs) during the
period of 7 months, non-availability of timely maintenance due to internal issues of Wind
World India Limited (WWIL), service providers, unfavorable weather conditions and
agitation by local people against operation of windmills.
The Company is required to apply for Open Access Permission to Maharashtra State
Electricity Distribution Company Limited (MSEDCL) every Financial Year. Currently, the
Company has the necessary Open Access Permission and is selling the wind power units
generated to a third party consumer.
All the seven 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 sold 5,120 RECs as against 3,243 RECs in the previous year. This has resulted in
revenue of Rs. 77 Lakhs (previous year Rs. 49 Lakhs) during the year. The Company is
having 10,537 RECs units as on 31 March 2017 (previous year 9,593 units).
OTHERS:
The Company owns lands and buildings thereon and apartments and offices in Pune,
Bangalore, New Delhi and Jaipur. The Company has granted most of these lands and buildings
and offices on leave and license basis to group and other companies.
During the year under review, your Company made investments of Rs. 26.48 Lakhs in
equity shares of Kirloskar Ferrous Industries Limited (KFIL). Pursuant to the said
investment, the Companys holding in KFIL has increased to 51.45% as on 31 March 2017,
from 51.43% as on 31 March 2016. During the year under review, the Company has invested
Rs. 1 Lakh in S.L. KirloskarCSRFoundation.The Company has thereafter transferred 200
equity shares of Rs. 10 each in the share capital of S.L. Kirloskar CSR Foundation. As a
result, the holding of the Company in S.L. Kirloskar CSR Foundation is reduced to 19.60%
from 20% as on 31 March 2017.
B. COMPANY PERFORMANCE:
During the year under review, your Company earned an income of Rs. 4,797 Lakhs
(previous year Rs. 7,670 Lakhs). The fall in income in the year under review is on account
of most of the companies, in which your Company holds shares have not declared any
dividend in the year under review. In the previous year, these companies had declared
dividend twice.
In the year under review, the Company received dividend of Rs. 713 Lakhs declared by
the investee companies for the Financial Year2016-17.
The Profit Before Tax is at Rs. 3,746 Lakhs (previous year Rs. 6,838 Lakhs) after
providing for depreciation of Rs. 100 Lakhs (previous year Rs. 89 Lakhs).
C. HUMAN RESOURCES:
As on 31 March 2017, the Company has 8 employees on its roll, including the Executive
Director.
D. EMPLOYEE STOCK OPTION PLAN:
Human resource is the key resource for the continuous growth and development of a
company. The Company strongly believes that an equity component in the compensation goes a
long way in aligning the objectives of an individual with those of the organisation.
To enable the employees, present and future, to share the wealth that they help to
create for the organisation over a certain period of time, the Board of Directors in its
meeting held on 4 July 2017, considered and approved to introduce and implement
"Kirloskar Industries Limited - Employee Stock Option Plan 2017" (KILESOP2017)
in accordance with the provisions of the Securities and Exchange Board of India (Share
Based Employee Benefits) Regulations, 2014, (SEBISBEB Regulations), subject to the
approval of the members.
Details of the proposal for the KIL ESOP 2017 are mentioned in the Statement setting
out material facts annexed to the Notice of the ensuing Annual General Meeting.
E. CONCERNS AND THREATS:
Following are the identified risk/ concerns and threats for the operations of the
Company:
• Natural calamities like cyclones, earthquake and fire or act of God damage the
windmills.
• Agitation by the local people against the operation of windmills.
• Frequent and erratic changes in the Open Access Rules and Regulations and
administrative delay in issuing Open Access Permission.
• Underutilisation by customer of units generated specially due to non-working in
various Time Zones.
• Major maintenance due to failure of important components of the windmills.
• Disturbances and failure in the Maharashtra State Electricity Distribution
Company Limited (MSEDCL) grid.
• Non-availability of timely maintenance by service provider adversely affecting
the operations of the windmills.
F. PROSPECTS:
Wind energy generation is largely dependent on natural factors such as velocity of
wind, continuity of the flow, etc. and are unpredictable and beyond control. The business
is also largely impacted adversely by frequent and erratic changes made by the MSEDCL in
the open access policies.
The market for Renewable Energy Certificates (RECs) continues to be sluggish; this
trend is expected to continue in the current Financial Year. Consequently, there is a risk
of RECs getting lapsed. Further, the Central Electricity Regulatory Commission vide its
order dated 30 March 2017, reduced the realisable rate of RECs from f 1,500/unit to f
1,000/unit. Considering the same, the Company is evaluating the proposal of selling green
energy i.e., without availing RECs benefits.
G. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:
The Company has adequate internal control systems to ensure operational efficiency,
accuracy and promptness in financial reporting and compliance ofvarious laws and
regulations.
The internal control system is supported by the internal audit process. An Internal
Auditor has been appointed for this purpose. The Audit Committee of the Board reviews the
Internal Audit Report and the adequacy and effectiveness of internal controls
periodically.
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 orimplied.
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. SUBSIDIARY COMPANY AND CONSOLIDATED FINANCIAL STATEMENTS:
As on 31 March 2017, the Company has one subsidiary, i.e., Kirloskar Ferrous Industries
Limited (KFIL).
The Board presents Audited Consolidated Financial Statements incorporating the duly
Audited Financial Statements of KFIL and as prepared in compliance with the Companys
Accounting Standard 21 as per the Companys (Accounting Standards) Amendment Rules, 2016,
notified by the Ministry of Corporate Affairs (MCA) and SEBI (Listing Obligations and
Disclosure Requirements) Regulations, 2015, (the Regulations).
Pursuant to Rule 5 of the Companies (Accounts) Rules, 2014, the Statement containing
the salient feature of the Financial Statement of a Companys subsidiary and associate
companies under the first proviso to Sub-section (3) of Section 129 of the Companies Act,
2013, (the Act), in Form AOC - 1 is required to be enclosed to the Financial Statements.
The Consolidated Financial Statements prepared as per the applicable provisions and
duly audited by the Statutory Auditors, are presented elsewhere in this Annual Report
along with Form AOC-1.
Further, the Company undertakes that the Annual Accounts of the Subsidiary Company and
the related detailed information shall be made available to the shareholders on demand, at
any point of time. The Annual Accounts of the Subsidiary Company shall also be kept open
for inspection by any shareholder at the Registered Office of the Company.
BRIEF HIGHLIGHTS OF BUSINESSES OF SUBSIDIARY COMPANY:
KIRLOSKAR FERROUS INDUSTRIES LIMITED (KFIL):
KFIL is in the business of manufacturing of iron castings and has its manufacturing
facilities at Bevinahalli Village in Karnataka and Solapurin Maharashtra.
The Board of Directors of KFIL has recommended a dividend of Rs. 1.75 (35%) per equity
share (Previous year interim dividend 25% i.e., Rs. 1.25 per equity share of Rs. 5 each)
for the Financial Year ended 31 March 2017.
KFILachieved net sales of Rs. 1,13,370 Lakhs (previous year Rs. 1,11,390 Lakhs).
Profit Before Tax (PBT) for the year under review stood at Rs. 12,146 Lakhs, as
compared to Rs. 8,522 Lakhs of previous year. Also Profit After Tax (PAT) for the year
under review stood at Rs. 9,057 Lakhs, as compared to Rs. 5,773 Lakhs of the previous
year.
KFIL sold 2,53,495 MT of Pig Iron valued at Rs. 58,891 Lakhs during the Financial Year
2016-17, as compared to 2,89,485 MT of Pig Iron valued at Rs. 62,312 Lakhs in the previous
year.
KFILsold 65,892 MT castings aggregating to Rs. 51,912 Lakhs during Financial Year
2016-17, as compared to 56,661 MT castings aggregating to Rs. 46,067 Lakhs in the previous
year.
KFIL participated in the auction of mines but the mines have been won by other
companies a price which was not economical to KFIL.
Government has informed that the Financial Year 2017-18, would bean important year for
the mining industry as there are around 300 mineral blocks to be leased (of which,
Karnataka alone has about 100 odd leases). These mines would be auctioned in different
states during the Financial Year 2017-18. KFIL will pursue in its efforts to acquire iron
ore mines from the e-auction.
Iron ore mining is slowly opening up and presently 29 mines have been allowed for
mining 33 million tons per annum. As demand is higher than the actual mining, iron ore
prices in Hospet sector are still higher.
During the year under review, KFIL repaid entire outstanding amount of long term loans.
Also KFIL has been able to reduce considerably the financing cost of working capital
facilities by availing facilities at a very competitive rate.
KFIL has undertaken the following projects during the year under review:
1) Commenced the civil work for machine shop at Koppal Plant and is expected to be
completed in first half of Financial Year 2017-18. Simultaneously KFIL is working on
getting the orders for machined castings from its customers and also on procuring machines
for machining of castings. Machine shop will be commissioned progressively in a phased
manner based on the order position. The completion of machine shop will facilitate an
increase in business by bringing more value added items for KFIL.
2) Installation of fettling facilities for superior casting finish at Solapur Plant.
3) Upgradation of Mini Blast Furnace I resulting in lower coke consumption and
increasing the production capacity of pig iron.
4) Commenced Railway siding project and the civil work has been completed. The project
is expected to be completed in Financial Year 2017-18. Completion of this project will
facilitate inward movement of raw materials and outward movement of pig iron resulting in
reduction in cost of transportation and handling losses.
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