Kirloskar Oil Engines Ltd Directors Report.

TO THE MEMBERS

OF KIRLOSKAR OIL ENGINES LIMITED

The Directors are pleased to present the 12th Annual Report together with the Audited Statement of Accounts for the year ended 31st March 2021 of Kirloskar Oil Engines Limited ("KOEL" or the "Company").

1. FINANCIAL RESULTS (STANDALONE)

Particulars 2020-21 2019-20
Total Income 2,720.40 2,914.87
Profit before exceptional items and tax 239.77 208.73
Exceptional Items (8.37) 16.49
Profit before tax 231.40 225.22
Tax Expense (Current & Deferred Tax) 61.66 54.84
Net Profit for the Period 169.74 170.38
Other Comprehensive Income 4.57 (1.94)
Total Comprehensive Income for the year, net of tax 174.31 168.44
Profit Brought Forward 1,192.73 1,137.61
Profit Available for Appropriation 1,362.47 1,307.99
Transfer to General Reserve - -
Dividend and dividend distribution tax 21.69 113.32
Balance of the Profit carried forward 1,345.31 1,192.73

2. COMPANYS FINANCIAL PERFORMANCE

Your Company posted sales of Rs. 2,663.62 Crores, a decrease of 6% as compared to the previous years sales of Rs. 2,840.57 Crores. Profit from operations was Rs. 231.40 Crores as against Rs. 225.22 Crores in the previous year.

The Profit After Tax was Rs. 169.74 Crores as against Rs. 170.38 Crores in the previous year.

3. DIVIDEND

The Directors have declared an interim dividend of 75% (Rs. 1.50/- per share) and also recommended a final dividend of 125 % (Rs. 2.50/- per share) for the year ended 31st March 2021. (Previous Year Interim Dividend 200%, Rs. 4 per share).

Total dividend payout for the Financial Year 2020-21 was Rs. 21.69 Crores. The payment of dividend is subject to deduction of TDS at the applicable tax rate.

The Dividend Distribution Policy of the Company is annexed herewith as Annexure A. In terms of Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 including amendments thereunder, the Dividend Distribution Policy of the Company is available on the Companys website (http://koel.kirloskar.com/sites/koel.kirloskar.com/pdfs/2020/Dividend%20 Distribution%20Policv%20-%2025%20Jan%202017.pdf)

4. ALTERATION OF MAIN OBJECT CLAUSE OF MEMORANDUM OF ASSOCIATION OF THE COMPANY

The Members of the Company at the Annual General Meeting held on 28th August 2020, had approved the alteration of the Main Object Clause of the Memorandum of Association of the Company to commence business for the products which are synergistic & natural extension of existing business portfolio, and which would help the Company pursue business growth in energy management / transformation solutions, water management solutions including agricultural farm mechanization space.

5. KIRLOSKAR OIL ENGINES LIMITED - EMPLOYEE STOCK OPTION PLAN 2019 (KOEL ESOP 2019) - The Members of the Company at the Annual General Meeting of Kirloskar Oil Engines Limited held on 9th August 2019, had passed a resolution for introducing Employees Stock Option Plan 2019 - (KOEL ESOP 2019), for the benefit of employees of the Company.

The resolution also accorded approval to the Board of Directors, to formulate the plan as per broad parameters outlined in the resolution, either directly or through a Nomination and Remuneration Committee.

The Nomination and Remuneration Committee at its meeting held on 5th March 2021, approved the grant of 9,40,000 stock options exercisable into 9,40,000 equity shares of Rs. 2/- each of the Company to its specified employees. KOEL ESOP 2019 is in compliance with the applicable provisions of the Companies Act, 2013 and the rules issued thereunder, Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 ("Employee Benefit Regulations") and other applicable regulations, if any.

The disclosures as required under Companies (Share Capital and Debentures) Rules, 2014, including amendments thereunder and Employee Benefit Regulations as on 31st March 2021 are as under:

Options granted during the Financial Year 2020-21 9,40,000
Options vested during the Financial Year 2020-21 Nil
Options exercised during the Financial Year 2020-21* NA
The total number of shares arising as a result of exercise of option during the year 2020-21* NA
Options lapsed during the year 2020-21 Nil
Exercise Price (Rs.) 103.14
Variation of terms of options during the year 2020-21 No variation
Money realized by exercise of options during the year 2020-21 (Rs.) Nil
Total number of options in force during the year 2020-21 9,40,000
Employee wise details of options granted to :
1. Key Managerial Personnel:
a) Mr. Sanjeev Nimkar, Managing Director 1,34,025
b) Mr. Pawan Kumar Agarwal, Chief Financial Officer 67,012
c) Ms. Smita Raichurkar, Company Secretary 5,004
2. Any other employee who receives a grant of options in any one year of option amounting to five percent or more of options granted during the year 2020-21 a) Mr. Sanjeev Nimkar b) Mr. Pawan Kumar Agarwal 1,34,025 67,012
3. Identified employees who were granted option, during any one year, equal to or exceeding one percent of the issued capital (excluding outstanding warrants and conversions) of the company at the time of grant during the year 2020-21. Nil

* Not yet vested

There have been no material changes to the KOEL ESOP 2019 during the Financial Year.

The Certificate from P G Bhagwat LLP, Chartered Accountants, Pune - (Firm Registration Number 101118W/W100682) Statutory Auditors of the Company, confirming that the scheme has been implemented in accordance with the aforesaid regulations and in accordance with the resolution passed by the Members of the Company at its Annual General Meeting held on 9th August 2019, would be placed before the Members at the ensuing Annual General Meeting. A copy of the same will be available for inspection at the Companys website viz. www.koel.co.in.

The disclosures on the scheme, details of options granted, changes to the scheme, if any, are placed on the website of the company as required under Employee Benefit Regulations, 2014 read with SEBI Circular No. CIR/CFD/POLICY CELL/2/2015 dated 16th June, 2015 and can be accessed on the web-link (https://koel.kirloskar.com/sites/koel.kirloskar.com/pdfs/2021/Employee%20Stock%20

Option%20Plan %20Disclosure%20as%20per%20SEBI%20Regulation.pdf).

In line with the Indian Accounting Standards ("Ind AS") 102 on Share Based Payments issued by the Institute of Chartered Accountants of India ("ICAI"), your Company has computed the cost of equity settled transactions by using the fair value of the options at the date of the grant and recognized the same as employee compensation cost over the vesting period.

6. DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS

Pursuant to SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, (the Regulations) including amendments thereunder:

a) Details of Key Financial Ratios of the Company as under:

Sr. No. Particulars Ratio as on 31st March 2021 Ratio as on 31st March 2020 Reason for significant change (more than 25%)
i. Debtors Turnover 7.4 7.9 -
ii. Inventory Turnover 9.4 10.5 -
iii. Interest Coverage Ratio 47.2 77.4 Higher utilization of working capital credit facilities
iv. Current Ratio 1.9 2.1 -
v. Debt Equity Ratio 0.04 0.01 Higher utilization of working capital credit facilities
vi. Operating Profit Margin (%) 7.9% 6.0% Optimization of operating costs
Sr. No. Particulars Ratio as on 31st March 2021 Ratio as on 31st March 2020 Reason for significant change (more than 25%)
vii. Net Profit Margin (%) 6.3% 5.9% -

Note: The Company did not have any non-current borrowing.

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

b) 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 As on 31st March 2021 As on 31st March 2020 % of change Reason for significant change more than 25%
1 Return on Net worth 8.6% 9.3% (8.1)% -

7. DIRECTORS

a) Changes in Composition of the Board of Directors

During the year under review,

i. The Members of the Company in the Annual General Meeting held on 28th August 2020, had approved the appointment of Mr. Sanjeev Nimkar (DIN 07869394), as a Director and also as the Managing Director of the Company, with effect from 29th April 2020.

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

iii. Ms. Gauri Kirloskar (DIN 03366274) retires by rotation at the ensuing Annual General Meeting and being eligible, offers herself for re-appointment.

The brief resumes and other details relating to the Directors who are proposed to be re-appointed, bas required to be disclosed under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 including amendments thereunder, form part of the Notice of Annual General Meeting.

b) Changes in Key Managerial Personnel

i) The term of re-appointment of Mr. Rajendra R. Deshpande (DIN 00007439) as the Managing Director & Chief Executive Officer of the Company expired on 28th April 2020. Consequent to this, he ceased as the Director and Key Managerial Personnel of the Company with effect from close of working hours of 28th April 2020.

ii) Mr. Nihal G. Kulkarni (DIN 01139147) resigned as the Managing Director of the Company, and his resignation was effective from the close of working hours of 28th April 2020. He, however, continues to hold the office as a Non-Executive Director of the Company with effect from 29th April 2020. Consequent to this, he ceased to be a Key Managerial Personnel of the Company with effect from close of working hours of 28th April 2020.

iii) Mr. Sanjeev Nimkar (DIN 07869394), the Managing Director of the Company, was appointed as the Key Managerial Personnel of the Company, with effect from 29th April 2020.

Other than the above, there are no other changes in Key Managerial Personnel of the Company in the Financial Year 2020-21.

c) Declarations from the Independent Directors

The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence as prescribed under Section 149 (7) of the Companies Act, 2013 & Rules thereof including amendments thereunder and Regulation 16(1)(b) & 25(8) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 including amendments thereunder.

The Company has also received declarations from all the Independent Directors of the Company confirming that they have complied with the Code for Independent Directors as prescribed in Schedule IV to the Companies Act 2013 including amendments thereunder. The said Code is available on the Companys website.

All the Independent Directors of the Company have enrolled themselves in the data bank with the ‘Indian Institute of Corporate Affairs, New Delhi, India and eligible Independent Directors have also completed the proficiency test.

d) A statement regarding opinion of the Board with regard to Integrity, Expertise and Experience (including the proficiency) of the Independent Directors appointed during the year:

The Members of the Company in the Annual General Meeting held on 28th August 2020 had approved the re-appointment of Mr. Pradeep R. Rathi as Independent Director for the second consecutive term of 5 years with effect from 7th August 2020.

Other than the above, there are no other appointment / re-appointment of Independent Directors of the Company in the Financial Year 2020-21.

e) Board Evaluation

The Board of Directors carried out a formal review of the performance and effectiveness of the Board, Committees of the Board and of the individual directors including the Chairman of the Board for the Financial Year 2020-21.

The performance of the Board was evaluated on the basis of criteria such as the Board composition and structure, effectiveness of Board processes, participation in organization strategy including Long Range Plan and Annual Operating Plan, inorganic growth opportunity evaluation, Enterprise Risk Management etc.

Using appropriate criteria the performance of the various Committees was separately evaluated by the Board.

In a separate meeting of Independent Directors, performance of non-independent directors, performance of the Board as a whole, performance of the Chairman, taking into account the views of executive directors and non-executive directors, was evaluated and inter alia discussed the issues arising out of Committee meetings and Board discussion including the quality, quantity and timely flow of information between the Company Management and the Board that is necessary for the Board to effectively and reasonably perform their duties.

A separate exercise was carried out to evaluate the performance of individual Directors including the Chairman of the Board, who were evaluated on parameters such as achievement against key performance objectives, attendance at meetings, time devoted for the Company, contribution in the Board process etc.

The Chairman of the Board had a meeting with the Independent Directors. This meeting was intended to obtain Independent Directors inputs on effectiveness of the Board processes.

The result of evaluation was satisfactory and meets the requirements of the Company.

f) Nomination and Remuneration Policy

The Board of Directors, on the recommendation of the Nomination & Remuneration Committee, has adopted a policy that lays guidelines for selection and appointment of Directors, Key Managerial Personnel and Senior Management personnel together with their remuneration. The Nomination and Remuneration Policy is available on the website of the Company. Web-link (http:// koel.kirloskar.com/sites/koel.kirloskar.com/pdfs/2019/Nomination%20and%20Remuneration%20 Policy.pdf)

g) Number of meetings of the Board

During the period under review, six (6) Board Meetings were held, the details of which form part of the Report on Corporate Governance.

h) Composition of Audit Committee and other Committees of the Board

The Composition of Committees of the Board viz. Audit Committee, Nomination and Remuneration Committee, Risk Management Committee and Stakeholders Relationship Committee forms part of the Report on Corporate Governance.

The Composition of Corporate Social Responsibility Committee forms part of Annexure B of this report.

During the year under review, the Board has accepted all the recommendations given by the Committees of the Board, which are mandatorily required.

8. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

During the year under review, the Company has invested in the equity shares of Arka Fincap Limited (earlier known as Kirloskar Capital Limited) and cumulative redeemable preference shares of La-Gajjar Machineries Private Limited. The details are given in the Financial Statements. The Company has not granted any Loans and Guarantees covered under Section 186 of the Companies Act, 2013 & Rules thereof including amendments thereunder.

9. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

All related party transactions that were entered into during the Financial Year 2020-21 were on an arms length basis and in the ordinary course of business. Hence, there are no transactions to be reported in Form AOC-2. 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. All related party transactions are routinely placed before the Audit Committee for approval after being duly certified by the Statutory Auditors/Independent Chartered Accountant.

The policy on related party transactions as adopted by the Board is uploaded on the Companys website.

The disclosures as per IND-AS 24 for transactions with related parties are provided in the Financial Statements of the Company.

10. RISK MANAGEMENT FRAMEWORK

The Companys risk management process is designed to facilitate identification, evaluation, mitigation and review of risks which may affect achievement of the objectives. It is aligned with the strategy deployment processes of the organization.

The risk management process which has been established across the Company, addresses major types of risks, including cyber security, which are at enterprise and business level. The risks are reviewed with respect to the likelihood and impact following a balanced bottom-up and top-down approach covering all businesses and functions of the Company. The review of the risks is done based on changes in the external environment, which have a significant bearing on the risks.

The Risk Management Policy developed by the Company guides the risk management processes which is in line with size, scale and nature of the Companys operations. The risk management process works at various levels across the organization. It is an ongoing process and forms an integral part of Management focus.

The enterprise risks and mitigation plans thereof are reviewed by the Risk Management Committee, Audit Committee and the Board of Directors periodically.

11. INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO THE FINANCIAL STATEMENTS

The Company has in place adequate internal financial controls with reference to the Financial Statements commensurate with the size, scale and complexity of its operations. Details of internal financial control and its adequacy are included in the Management Discussion and Analysis Report, which forms part of this Report.

12. CORPORATE SOCIAL RESPONSIBILITY

The Company has always believed in working for the betterment and upliftment of society. Corporate Social Responsibility (CSR) has been practiced and ingrained over the years in the Company. The focus areas under CSR have remained consistent over the years and include Education, Health and Hygiene, Environment, Disaster Management and Rural Development etc. The Company strongly believes in ‘Enriching Lives of the people in the communities in which it operates.

The Company has adopted the Corporate Social Responsibility (CSR) Policy which is further amended in lines with the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021.

The Composition of CSR Committee of the Board and Report on CSR activities is annexed herewith as Annexure B.

13. VIGIL MECHANISM / WHISTLE BLOWER POLICY

The Company has adopted a Vigil Mechanism / Whistle Blower Policy. The Policy provides a mechanism for employees of the Company and other persons dealing with the Company to report to the Chairman of the Audit Committee any instance of unethical behaviour, actual or suspected fraud or violation of the Companys code of conduct 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 or any other instance.

No person has been denied access to the Audit Committee in this regard. There were no complaints filed / pending with the Company during the year.

The Policy is uploaded on the Companys website. Web-link (http://koel.kirloskar.com/sites/koel.kirloskar. com/pdfs/2019/Whistle%20Blower%20-%20Vigil%20Mechanism.pdf)

14. ANNUAL RETURN

As required under 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 2019-20 is available on the web-link (https://koel.kirloskar.com/sites/koel.kirloskar.com/pdfs/2021/Annual%20 Return 2019-20 KOEL.pdf) and the Annual Return for Financial Year 2020-21 will be made available on the website of the Company once it is filed with the MCA.

15. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE AND OUTGO

Information relating to conservation of energy, technology absorption and foreign exchange earnings and outgo as required under section 134 (3)(m) of the Companies Act, 2013, & Rules thereof including amendments thereunder, are provided in Annexure C to this report.

16. PARTICULARS OF EMPLOYEES

Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 including amendments thereunder, are annexed in Annexure D of this report.

The particulars of employees pursuant to Section 197(12) of the Companies Act, 2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 including amendments thereunder, forms part of this report. In terms of Section 136 (1) of the Companies Act, 2013 & Rules thereof including amendments thereunder, the Directors Report is being sent to the shareholders without this Annexure. A copy of this annexure will be made available in electronic form to the Members on request raised by them on the dedicated email id of the Company at investors@kirloskar.com.

17. POLICY ON PREVENTION OF SEXUAL HARRASSMENT

The Company has in place a Policy for prevention of sexual harassment at workplace. This inter alia provides a mechanism for the resolution, settlement or prosecution of acts or instances of sexual harassment at work and ensures that all employees are treated with respect and dignity. The Company has complied with the provisions relating to the constitution of internal complaints committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

During the year under review, the Company continued with awareness module for this policy in its employee induction program.

There were no complaints filed / pending with the Company during the year.

18. GENERAL

During Financial Year 2020-21:

a. There were no public deposits accepted by the Company pursuant to provisions of the Companies Act, 2013 & Rules thereof including amendments thereunder.

b. Neither the Managing Director nor the Whole-time Directors of the Company received any remuneration or commission from the subsidiary Companies.

c. There was no instance of fraud during the year under review, which required the Statutory Auditors to report to the Audit Committee and / or Board under Section 143(12) of Act & Rules thereof including amendments thereunder.

d. The Company has maintained cost records as specified by the Central Government under subsection (1) of section 148 of the Companies Act, 2013 & Rules thereof including amendments thereunder.

e. The Company has complied with all applicable mandatory Secretarial Standards issued by the Institute of Company Secretaries of India, New Delhi.

f. To the best of our knowledge, the Company has not received any order from Regulators, Courts or Tribunals, which may impact the going concern status or the operations of the Company in future.

g. 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.

19. SUBSIDIARY COMPANY AND CONSOLIDATED FINANCIAL STATEMENTS

As on 31st March 2021, the Company had the following three subsidiaries:

a) KOEL Americas Corp., USA ("KOEL Americas")

For the fiscal ended 31st March 2021, the Sales Revenue was $ 38,26,059 (Rs. 28.24 Crores) [Previous Year $27,04,328]. The Profit after Tax was $ 98,769 (Rs. 0.54 Crores) [Previous Year $101,756].

The revenue from business in the Financial Year 2020-21 has grown by 49% to US$ 3,812,010 as compared to US$ 2,549,443 in the Financial Year 2019-20. Impact of COVID-19 pandemic on revenues was severe in the Quarter 1 of Financial Year 2020-21 but the later quarter sales had a boost, especially in the Agriculture segment.

All the 4 intended engine models certified by Environment Protection Agency (EPA) were commercially available in the Financial Year 2020-21.

The revenues from Agricultural segment grew by 110% as compared to previous fiscal to $ 2,169,901, which covers sales in the Central American region. This is result of increase in demand for agricultural products.

The revenues of industrial segment also grew by 2.5 times as compared to previous year to $ 879,357, which includes sale of FM/UL certified fire pump engines to OEMs in USA and Latin America.

The revenues from Power Generation segment decreased by 50% as compared to previous year to $ 615,338. It is result of lower demand and also due to lock-down condition on account of COVID-19 pandemic as there was a delay for developing new generator sets by OEMs. Severe market conditions due to emergence of the COVID-19 pandemic have affected the revenues from countries like Peru, Venezuela, Argentina, Colombia, and Caribbean islands.

KOEL Americas continues to stock generator sets and engines in Miami, Florida for ready stock availability for Latin American as well as the United States of Americas distributors.

During the year under review, KOEL Americas has provided online sales training to their distributors and online service training to the technical team. The Company is also using social media campaigns to stay in touch with the market as well as for brand promotion.

KOEL Americas is in the process of developing common rail diesel injection engines to address the construction, agriculture and industrial segments in North American region. The Company also expects to make natural gas engines commercially viable in the later part of Financial Year 2021-22 and the efforts towards exploring the market for this is progressing well. This is likely to boost the Companys growth prospectus in the long term.

The United States of America government has launched a financial assistance program for Small businesses affected by COVID-19 pandemic called "Corona Virus Relief Option". Under this relief package a program called "Paycheck Protection Program" (PPP), has been announced. The Company had applied for this relief package in the first and second draws.

b) La-Gajjar Machineries Private Limited ("LGM")

The Financial Year 2020-21 saw the COVID-19 outbreak challenge that disrupted lives as well as businesses worldwide. The rapid transmission of the virus across the world has meant families, communities and businesses must adapt to new ways of living and working. Given the need to manage the business dynamically in the wake of the far-reaching effects of the COVID-19 pandemic, the Company took the prudent decision early in the year to focus on growth and the delivery of underlying operating profit.

For the fiscal year ended 31st March 2021, the Sales Revenue was Rs. 519.83 Crores (PY Rs. 467.09 Crores). Net Profit after tax was Rs. 19.53 Crores (PY Rs. 16.21 Crores).

LGM continued to expand its network both in domestic and international markets and geographies. ‘Varuna brand continued to expand its footprint in new potential countries like Somalia, Romania & Bulgaria. LGM is also planning to expand its distribution network in South East Asian countries.

LGM continued to focus on quality standards and has developed energy efficient pumps that consume less power, save electricity and thereby give higher returns on initial investment.

In the Financial Year 2019-20, the Board of Directors of LGM had approved the long-term strategy of consolidation of all the manufacturing facilities of LGM in and around Ahmedabad, Gujarat. In the Financial Year 2020-21, LGM has identified land for this purpose and is in the process of completing the legal formalities for acquisition of land for this purpose. The said project will be funded through a combination of long term bank borrowings and internal accruals.

During the Financial Year 2020-21, LGM has incorporated a Wholly Owned Subsidiary namely Optiqua Pipes and Electricals Private Limited based in Ahmedabad, on 19th February 2021, with a view to backward integrating and also developing its "allied products" business vertical.

The business of pipes, cables & wires of M/s. Optiflex Industries, a Partnership Firm, based in Ahmedabad, has been transferred (on a slump sale basis as a going concern) to Optiqua Pipes and Electricals Private Limited on 16th April 2021.

c) Arka Fincap Limited (formerly known as Kirloskar Capital Limited - "AFL")

Given the impact of COVID-19 on the economy, along with its impact on the financial services business, AFL adopted a cautious and conservative approach in building its book till the economy shows sign of stabilization.

For the fiscal year ended 31st March 2021, the revenue was Rs. 101.88 Crores (Previous Period 20th April 2019 to 31st March 2020 Rs. 48.44 Crores) and Net Profit after tax was Rs. 16.88 Crores (Previous Period 20th April 2019 to 31st March 2020 Loss Rs. 6.10 Crores)

During the year under review, the Company invested Rs. 124.82 Crores towards Rights Issue of AFL, increasing the Equity Share Capital to Rs. 651.32 Crores including securities premium.

AFL started its lending business with a focus on three different segments namely Corporate, Real Estate and SME/MSME Lending. During the year, AFL did gross disbursements of more than Rs. 1,500 Crores across various industries including Industrial Pipes, Transportation, Cement, Power, Pharmaceutical, Warehousing, Logistics, Construction etc. and also started venturing into SME/MSME/ Retail segment. With this, all three business segments have started generating assets for AFL and contribute to the long-term growth of AFL.

As on 31st March 2021, AFL has Assets Under Management (AUM) of Rs. 1,124 Crores. (As on 31st March 2020 was Rs. 447.54 Crores). There have been no overdues in the portfolio of AFL.

On the Liability side, AFL has established relationships with 16 institutional lenders and raised more than Rs. 750 Crores. As on 31st March 2021, outstanding borrowing was Rs. 665.64 Crores. The liquidity position of AFL is comfortable. As on 31st March 2021, AFL has cash or equivalent assets of Rs. 226.08 Crores which includes fixed deposits with banks, investment in liquid schemes of various MFs and balances lying in current accounts.

AFL continues to have credit rating of AA [-] for its long-term borrowings and A1[+] for its shortterm borrowings by CRISIL Limited. During the year, Infomerics Valuation and Rating Private Limited also assigned rating of AA[-] for one of its Non Convertible Debentures (NCD) issuance.

AFL considers technology as one of the major drivers of growth, sustenance, and subsequently to improve operational excellence. Effective collaboration and no disruptions to the systems and operations ensured no loss of productivity and helped the Company to achieve business goals.

The consolidated financial statements of the Company and its three subsidiaries, prepared in accordance with IND-AS 110, issued by Ministry of Corporate Affairs, forms part of this Annual Report. A statement containing the salient features of the financial statements of the subsidiary company 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 & Rules thereof including amendments thereunder, the financial statements along with relevant documents of the Company and its subsidiaries are available on the Companys website.

The annual accounts of the subsidiaries and related detailed information will be available for inspection in electronic form based on the Members request raised by them on the dedicated email id of the Company at investors@kirloskar.com.

20. AUDITORS

a) Statutory Auditors

The Members of the Company in their meeting held on 5th August 2016, had re-appointed P G Bhagwat LLP Chartered Accountants, Pune, (Firm Registration Number 101118W/W100682) as Statutory Auditors of the Company for a second term of 5 consecutive years to hold office from Annual General Meeting held on 5th August 2016 till the conclusion of the Annual General Meeting to be held in the year 2021.

The Board of Directors, based on recommendation of the Audit Committee considered and recommended for approval by the Members of the Company at its forthcoming Annual General Meeting, the appointment of G. D. Apte, Chartered Accountants, Pune, (Firm Registration Number 100515W) as Statutory Auditors of the Company for a first term of 5 consecutive years to hold office from Annual General Meeting to be held in the year 2021 till the conclusion of the Annual General Meeting to be held in the year 2026.

The Company has received from the proposed new auditors the requisite certificate pursuant to Section 139 of the Companies Act, 2013 & Rules thereof including amendments thereunder.

The Report given by the Auditors on the Standalone and Consolidated financial statements of the Company for the Financial Year 2020-21 is part of this report. There are no qualifications, reservations, adverse remarks or disclaimer given by the Auditors in their report.

b) Cost Auditors

M/s. Parkhi Limaye & Co, Cost Accountants (Firm Registration No. 191) carried out the cost audit during the year. The Board of Directors has appointed M/s. Parkhi Limaye & Co. as Cost Auditors of the Company for the Financial Year 2021-22 as required under section 148 of the Companies Act, 2013 & Rules thereof including amendments thereunder.

c) Secretarial Audit Report

The Board of Directors has appointed Mr. Mahesh J. Risbud, Practicing Company Secretary [PCS No. 185] to conduct Secretarial Audit of the Company under section 204 of the Companies Act, 2013 & Rules thereof including amendments thereunder.

The Secretarial Audit Report is annexed herewith as Annexure E-1.

There are no adverse remarks / qualifications of Secretarial Auditors in the Secretarial Audit Report for the year ended 31st March 2021.

Mr. Mahesh J. Risbud, Practising Company Secretary, Pune, has submitted the Secretarial Compliance Report as laid down in SEBI Circular CIR/CFD/CMD1/27/2019 dated 8th February 2019, and has also confirmed that the Company has complied with all the applicable SEBI Regulations and circulars / guidelines issued thereunder, for the Financial Year 2020-21.

d) Secretarial Audit of Material Unlisted Subsidiary

La-Gajjar Machineries Private Limited (LGM), is a material unlisted subsidiary of the Company. The Secretarial Audit of LGM for the Financial Year 2020-21 was carried out pursuant to Section 204 of the Companies Act, 2013 & Rules thereof including amendments thereunder read with Regulation 24A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 including amendments thereunder. The Secretarial Audit Report of LGM has been submitted by Mr. Mahesh J. Risbud, Practicing Company Secretary for the Financial Year 2020-21.

The Secretarial Audit Report is annexed herewith as Annexure E-2.

There are no adverse remarks / qualifications in the Secretarial Audit Report of LGM for the the Financial Year 2020-21.

21. MANAGEMENT DISCUSSION & ANALYSIS AND REPORT ON CORPORATE GOVERNANCE

The Management Discussion & Analysis and the Report on Corporate Governance as required under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, including amendments thereunder, forms part of this Annual report.

A Certificate from the Statutory Auditors of the Company regarding compliance with conditions of corporate governance as required under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, including amendments thereunder, also forms part of this Annual Report.

22. BUSINESS RESPONSIBILITY REPORT

Business Responsibility Report as required under Regulation 34(2)(f) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, including amendments thereunder, forms part of this Annual Report.

23. DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to Section 134 of the Companies Act, 2013, including rules made thereof and amendments thereunder, the Directors, based on the representations received from the operating management, confirm that:

a) In the preparation of the Annual Accounts, the applicable accounting standards have been followed and that no material departures have been made from the same;

b) They have selected such accounting policies, and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March 2021 and of the profit of the Company for the year ended on that date;

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

d) They have prepared the annual accounts on a going concern basis;

e) They have laid down internal financial controls to be followed by the Company and such internal financial controls are adequate and operating effectively; and

f) They have devised proper systems to ensure compliance with provisions of all applicable laws and such systems are adequate and operating effectively.

24. CAUTIONARY STATEMENT

Statements in this report, particularly those which relate to Management Discussion & 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.

25. ACKNOWLEDGEMENTS

On behalf of the Board of Directors, I would like to pay tribute to the following groups of people whose support has helped us, in one way or other, in navigating through the difficult year.

I am thankful for the governments approach and measures taken to contain the spread of COVID-19 in the country. This has enabled the Country to have a good control on the pandemic and the gradual resumption of social and business activities from June 2020, clearing a path for the economy to emerge from a slow-down. The various ministries advisories, guidance and directives, for example on infection control and safe management, have also been important resources to us in implementing health and safety protocols to operate safely and prevent infections at our plants, warehouses and other premises in Financial Year 2020-21.

I am thankful to our customers for returning and trusting us following the reopening of the economy in June 2020. Our top priority of providing quality products and services to all our customers remains unchanged in these difficult times.

Thank you to our employees for their professionalism as they responded and adapted to the changes to their work and workplace brought about by the pandemic. Our people rose to the challenge of ensuring the continued delivery of products and services to customers in all circumstances.

On behalf of the Directors, I would like to extend our sincere gratitude to our shareholders, investor community, bankers and suppliers for their continuous support and commitment.

I would like to express my appreciation to the Board of Directors for their invaluable guidance, wisdom, and support in guiding the Company through this rather difficult year. I look forward to working with them to drive KOEL to greater heights in coming years.

For and on behalf of the Board of Directors

Sd/-

ATUL C. KIRLOSKAR

EXECUTIVE CHAIRMAN

DIN:00007387

Date: 13th May 2021

Place: Pune