kirloskar oil engines ltd Directors report

TO THE MEMBERS

OF KIRLOSKAR OIL ENGINES LIMITED

The Directors are pleased to present the 14^th Annual Report together with the Audited Statement of Accounts for the year ended 31^st March 2023 of Kirloskar Oil Engines Limited ("KOEL" or the "Company").

1. COMPANYS FINANCIAL PERFORMANCE

Your Company posted sales of H 4,073.04 Crore, an increase of 25% as compared to the previous year of H 3,267.59 Crore. Profit before tax and exceptional item was H 364.14 Crore as against H 210.05 Crore in the previous year.

The Profit After Tax was H 270.25 Crore as against H 208.01 Crore in the previous year.

2. FINANCIAL RESULTS (STANDALONE)

Particulars	2022-23	2021-22
Total Income	4,143.45	3,324.42
Profit before exceptional items and tax	364.14	210.05
Exceptional Items	-	52.65
Profit before tax	364.14	262.70
Tax Expense (Current & Deferred Tax)	93.89	54.69
Net Profit for the Period	270.25	208.01
Other Comprehensive Income	(8.93)	3.06
Total Comprehensive Income for the year, net of tax	261.32	211.07
Profit Brought Forward	1,495.65	1,345.31
Profit Available for Appropriation	1,765.90	1,553.32
Transfer to General Reserve	-	-
Dividend and Dividend Distribution Tax	72.34	57.84
Balance of the Profit carried forward	1,687.15	1,495.65

3. DIVIDEND

The Directors have declared an interim dividend of 125% (H 2.5/- per share) and also recommended a final dividend of 125 %

(H 2.5/- per share) for the year ended 31^st March 2023. (Previous Year Interim Dividend 75%, H 1.50/- per share and Final Dividend 125%, H 2.50/- per share).

Total dividend payout for the financial year was H 72.34 Crore. The payment of dividend subject to deduction of TDS at the applicable tax rate.

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 ( https://www.kirloskaroilengines.com/documents/541738/0a36d92a-4450-1010-8a11 -d92ec5426c7c).

4. 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 2023	Ratio as on 31st March 2022	Reason for change
i.	Debtors Turnover*	9.5	8.7	Higher sales growth
ii.	Inventory Turnover*	7.2	8.1	Higher inventory for sales in next quarter
iii.	Interest Coverage Ratio	84.8	55.5	Higher EBIT with lower finance cost
iv.	Current Ratio*	1.4	1.8	Higher inventory for sales in next quarter
v.	Debt Equity Ratio*	0.03	0.05	Lower Borrowings
vi.	Operating Profit Margin (%)	8. 4%	5.8%	Better price realisations from customers resulting to improved operating margins
vii.	Net Profit Margin (%)*	6.6%	6.4%	Improved operating margins partially offset by exceptional gain in previous year

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 2023	As on 31st March 2022	% of change	Reason for change
1	Return on Net worth	12.1%	10.1%	19.8%	Improved operating margin with good sales growth

5. SUBSIDIARY COMPANY AND CONSOLIDATED FINANCIAL STATEMENTS

On consolidated basis for the year ended 31^st March 2023, your Company posted Revenue from Operations of H 5,023.80 Crore

(Previous year H 4,021.98 Crore), Profit before tax and exceptional item was H 448.93 Crore (Previous year H 231.88 Crore) and Profit After Tax was H 331.65 Crore (Previous year H 170.87 Crore).

The consolidated financial statements of the Company and its 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 forms part of 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 subsidiary are available on the Companys website.

The annual accounts of the subsidiary 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.

a) The details of financial performance of subsidiaries including step down subsidiaries and associate company of subsidiary as on 31^st March 2023 are as under:

Sr.	Name of the Company	Category	Turnover / Revenue (Rsin Cr.)		Profit after Tax (Rs in Cr.)
No.			FY 2022-23	FY 2021-22	FY 2022-23	FY 2021-22
1	Kirloskar Americas Corporation, USA (earlier known as KOEL Americas Corporation - KAC)	Subsidiary Company	28.62	30.27	1.37	2.00
2	La-Gajjar Machineries Private Limited, Ahmedabad (LGM)	Subsidiary Company	538.69	531.98	7.88	(3.88)
3	Arka Financials Holdings Private Limited, Mumbai (AFHPL)	Subsidiary Company	0.39	0.00	(0.28)	(2.57)
4	Optiqua Pipes and Electricals Private Limited, Ahmedabad (OPEPL)	Step-down Subsidiary Company	43.44	38.96	(3.17)	(1.84)
5	Arka Fincap Limited, Mumbai (AFL)	Step-down Subsidiary Company	370.66	201.72	61.36	32.52
6	Arka Investment Advisory Services Private Limited, Mumbai (AIASPL)*	Step-down Subsidiary Company	-	-	(0.13)	-
7	ESVA Pumps India Private Limited, Coimbatore (ESVA)**	Associate Company of OPEPL	101.04	55.62	3.03	1.44

*AIASPL was incorporated on 30^th March 2022, as wholly owned subsidiary of AFHPL and there were no commercial operations carried out as on 31^st March 2023.

** ESVA became Associate Company from 4^th October 2021.

b) Operational Highlights of subsidiaries including step down subsidiaries during FY 22-23 are as under:

i. Kirloskar Americas Corp., USA (previously known as KOEL Americas Corp. – "KAC")

• The Firefighting segment contributed 52% of the revenue. The Stocking and packaging of fire pump engines with base frames and other accessories within the USA have led to the business growth in the region.

• KAC suffered an overall de-growth as compared to the Financial Year 2021-22 due to setbacks in the Power Generation business. However, contributions of the other segments viz. Firefighting, industrial and Customer support augur well for the future.

• KAC continued with its product development plans of 2 models of EPA Tier IV engines.

ii. La-Gajjar Machineries Private Limited ("LGM")

• During the financial year 2022-23, KOEL had acquired 24% equity stake of LGM as per the Shareholders Agreement including amendments thereof. Consequent to this, LGM is now a Wholly Owned Subsidiary of KOEL.

• LGM purchased the new land situated in Sanand GIDC, Ahmedabad, Gujarat, for its long-term strategy of consolidation of all the manufacturing facilities. LGM is in process of setting up of manufacturing facilities at said location. This project of setting up of new manufacturing facilities will be funded through a combination of long term bank borrowings, unsecured loan from parent company and internal accruals.

• LGM continued to expand its network both in domestic and international markets and geographies. In this Financial Year, LGM reported highest exports of H 152.7 Cr. LGM continued to expand its footprint in new geographical regions viz. South Africa, South East Asia and Latin America. LGM continued to focus on quality standards.

• The focus is to expand product basket by way of new product development.

iii. Optiqua Pipes and Electricals Private Limited ("OPEPL") - Step Down Subsidiary

• During the financial year 2022-23, there was a volatility in the commodity rates of raw materials for the products of OPEPL. These prices of the products are directly linked to movement in the rates of the major Raw Materials i.e. Copper in case of Wires & Cables and PVC Resin in case of Pipes, which covers the major sales of the Company. Volatility in major raw materials resulted in high pressure on the margins, impact of which was observed in the overall bottom line of the Company for the current period.

• Going forward, to reduce the impact of such commodity price volatility, for its major customers, company is entering into back-to-back arrangements with its raw material suppliers, wherever possible.

iv. Arka Financial Holdings Private Limited ("AFHPL")

• AFHPL was incorporated with an objective to enhance the strategic flexibility to build vibrant robust platform for the financial services business.

• Currently, AFHPL has 2 subsidiaries namely; Arka Fincap Limited and Arka Investment Advisory Services Private Limited.

• During the year under review the Company invested H 179.60 Crore towards Rights Issue of AFHPL, increasing Equity Capital from H 837.00 Crore to H 1016.60 Crore including securities premium.

v. Arka Fincap Limited ("AFL") - Step Down Subsidiary

• AFL operates in four principal lines of business viz. Corporate Lending, Real Estate and Urban Infra Financing, Syndication, MSME and Personal Lending. In line with the objective of ‘delivering technology-enabled, creative and personalised financial solutions for an enhanced customer experience, AFL views technology as the primary enabler for business growth.

• Corporate Lending division designs lending solutions to medium and large corporations by providing them bespoke loans to meet specific requirements of their business. AFL offers customised solutions to meet their fund requirements across diverse sectors ranging from pharmaceuticals, renewable energy, power, telecom, entertainment, industrials, auto components and others.

• Real estate and Urban Infra Lending gives a partial or whole capital infusion to help Indias infrastructure and real estate development. The focus is on the needs of the prestigious clients guarantees a seamless procedure from beginning to end.

• The MSME division continues to grow across three products, which includes Secured Business Loan, Supply Chain Finance, and Personal Loans. AFL also entered into partnerships for co-lending with other smaller NBFCs and with various other fintech companies to widen its market reach and gain maximum customers from the market.

• Syndication business of AFL provides holistic solutions to corporate clients for project finance, capital expenditure, general corporate requirements, last mile financing, subordinated structured debt through advisory / syndicating / sell down and co-lending strategies across sectors. The syndication business aids in maintaining investor and client relationships.

vi. Arka Investment Advisory Services Private Limited ("AIASPL") - Step Down Subsidiary

• AIASPL was incorporated with an objective including managing or assisting in raising funds for alternative investment funds, venture capital funds, private equity funds, debt funds, structured finance funds, offshore funds, pension funds, property related funds or any other funds, undertaking the business of providing investment advisory services, act as an asset manager, advisor, sponsor, designated partner in respect of various investment or pooled investment vehicles and/ or entities for managing and / or advising with respect to the assets / and / or investments of or by Alternative Investment Funds.

• Currently, AIASPL is an Investment Manager to Arka Credit Fund, a fund registered as a Category II Alternative Investment Fund with SEBI and its scheme i.e., Arka Credit Fund I.

6. 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 9^th August 2019, 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 Members of the Company at the Annual General Meeting of Kirloskar Oil Engines Limited held on 12^th August 2021, passed a resolution amending the Kirloskar Oil Engines Limited – Employee Stock Option Plan 2019 in terms of coverage of the KOEL ESOP 2019 to the eligible employees of its subsidiary company, in or out of India except such subsidiary company(ies) which are formed and engaged in financial service business including without limitation to the Arka Fincap Limited and also authorized the Board of Directors or the Nomination and Remuneration Committee of the Company to grant the Options to such employees of the Subsidiary Company(ies) from time to time.

The Securities and Exchange Board of India ("SEBI") notified the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 ("SEBI SBEB Regulations") by repealing and merging the SEBI (Share Based Employee Benefits) Regulations, 2014 and the SEBI (Issue of Sweat Equity) Regulations, 2002 (collectively referred to as "Erstwhile Regulations") with appropriate modifications which came into force from 13^th August 2021. The Nomination and Remuneration Committee in its meeting held on 27^th October 2021 further amended the KOEL ESOP 2019 to align and comply with the requirements of the SEBI SBEB Regulations in order to bring flexibility provided under the SEBI SBEB Regulations.

The Company had obtained in-principle approval from BSE Limited (BSE) and National Stock Exchange of India Limited (NSE) for listing of 14,00,000 equity shares under KOEL ESOP 2019, pursuant to Regulation 12 of the Chapter II of the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014.

The Nomination and Remuneration Committee at its meetings held on 5^th March 2021 approved the grant of 9,40,000 stock options exercisable into 9,40,000 Equity Shares of H 2/- each and on 18^th May 2022 approved the grant of 2,75,000 stock options exercisable into 2,75,000 Equity Shares of H 2/- each of the Company to its specified employees of the Company. Further the Nomination and Remuneration Committee at its meeting held on 27^th October 2021, approved the grant of 50,000 stock options exercisable into 50,000 Equity Shares of H 2/- each of the Company to the specified employees of La-Gajjar Machineries Private Limited, a wholly owned subsidiary company.

KOEL ESOP 2019 is in compliance with the applicable provisions of the Companies Act, 2013 and the Rules issued thereunder, the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 ("SEBI SBEB Regulations") and other applicable regulations, if any.

The disclosures as required under Companies (Share Capital and Debentures) Rules, 2014, including amendments thereunder as on 31^st March 2023 is as under:

Options granted during the financial year 2022-23	2,75,000
Options vested during the financial year 2022-23	1,53,236*
Options exercised during the financial year 2022-23	1,36,970**
The total number of shares arising as a result of exercise of option during the year 2022-23	1,29,776
Options lapsed during the year 2022-23	1,37,369
Exercise Price	103.14, 128.88,87.93
Variation of terms of options during the year 2022-23	No variation
Employee wise details of options granted to during FY 2022-23 :

1. Key Managerial Personnel:	Nil
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 2022-23:	40,000
a) Mr. Arvind Chabra	40,000
b) Mr. T Parthasarathy	30,000
c) Mr. Ajit Hardikar	20,000
d) Mr. Ajay Saraf	15,000
e) Mr. Nikhil Rao	15,000
f) Mr Anand Dantale
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 2022-23.	Nil

* 9,425 options were vested to the specified employees of La-Gajjar Machineries Private Limited, a wholly owned subsidiary company and 1,43,811 options were vested to the specified employees of the Company as per vesting schedule.

**It includes 1,571 options exercised during the financial year 2021-22 and allotted during the financial year 2022-23.

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

The certificate from Mr. Mahesh J. Risbud, Practicing Company Secretary [PCS No. 185] Secretarial 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 Meetings held on 9^th August 2019 and 12^th August 2021, will 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.kirloskaroilengines.com.

The disclosures on the scheme, details of options granted, changes to the scheme, if any, etc. are placed on the website of the Company as required under the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 ("SEBI SBEB Regulations") and can be accessed on the Companys website viz. https://www.kirloskaroilengines. com/employee-stock-option-plan.

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.

7. CAPITAL STRUCTURE

The Company allotted 1,29,776 equity shares of H 2/- each to the eligible employees of the Company and eligible employees of La-Gajjar Machineries Private Limited during the Financial year 2022-23 pursuant to KOEL ESOP 2019. Consequent to the aforesaid allotment, Issued Capital and Subscribed Capital of the Company was increased from 14,46,14,326 equity shares of H 2/- each to 14,47,44,102 equity shares of H 2/- each and Paid-up Capital was increased from 14,46,13,861 equity shares of H 2/- each to 14,47,43,637 equity shares of H 2/- each.

The Company allotted 42,017 equity shares of H 2/- each on

16^th May 2023, upon exercise of options vested to the eligible employees of the Company pursuant to KOEL ESOP 2019.

8. 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 11^th August 2022, had approved the continuation of the appointment of Mr. Atul Kirloskar (DIN 00007387) as Whole Time Director with designation as the Executive Chairman of the Company to hold office till 31^st March 2023 with retrospective effect from 26^th January 2022. In compliance with Section 149, 152, 197 and other applicable provisions, if any of Companies Act, 2013 (the "Act"), including rules thereof and Regulation 17(1C) and other applicable provisions, if any of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, ("SEBI LODR") (including any statutory modification(s) or re-enactment thereof for the time being in force), based on the recommendation of the

Nomination and Remuneration Committee, the Board of Directors of the Company appointed Mr. Atul Kirloskar (DIN 00007387) as the Chairman and Non-Executive Director of the Company with effect from 1^st April 2023 for a term of 1 (one) year, whose term of office as a Whole Time Director of the Company with designation as Executive Chairman ended on 31^st March 2023. The members of the Company approved the said appointment by way of Postal Ballot on 19^th April 2023.

ii. The Members of the Company in the Annual General Meeting held on 11^th August 2022, had approved the re-appointment of Mr. Satish Jamdar (DIN 00036653) as "Non-Executive Independent Director" for a second term of 4 (four) consecutive years with effect from 4^th August 2022.

iii. The Members of the Company in the Annual General Meeting held on 11^th August 2022, had approved the appointment of Mrs. Purvi Sheth (DIN 06449636), as a "Non-Executive Independent Director" for a first term of 5 (five) consecutive years with effect from 19^th May 2022.

iv. The Members of the Company in the Annual General Meeting held on 11^th August 2022, had approved the appointment of Ms. Gauri Kirloskar (DIN 03366274) as a Whole Time Director with the designation as Managing Director of the Company for a term of 3 years with effect from 20^th May 2022.

v. Mrs. Mrunalini Deshmukh (DIN 07092728) tendered her resignation as Independent Director of the Company due to pre-occupation with effect from 20^th May 2022 vide resignation letter dated 19^th May 2022. Further, the Company has received confirmation from Mrs. Mrunalini Deshmukh that there is no other material reason for her resignation other than those mentioned in her resignation letter dated 19^th May 2022. The said confirmation was filed with BSE Limited and National Stock Exchange of India Limited on 19^th May 2022.

vi. In compliance with Section 149 of the Companies Act, 2013 & Rules thereof including amendments thereunder and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 including amendments thereunder, based on the recommendation of the Nomination and Remuneration Committee, the Board of Directors of the Company appointed Mr. Arvind Goel (DIN 02300813), as an Additional Director of the Company in the capacity of "Non-Executive Independent Director" with effect from 19^th May 2023. In accordance with Section 161 of the Companies Act, 2013 & Rules thereof including amendments thereunder, he will hold office of Director up to date of ensuing Annual General Meeting. The Company has received requisite notice in writing from a member proposing his candidature for the office of Director. The resolution seeking approval of the Members by special resolution for the appointment of Mr. Arvind Goel for a first term of 5 (five) consecutive years, has been incorporated in the Notice of the forthcoming Annual General Meeting of the Company.

vii. Mr. M. Lakshminarayan (DIN 00064750) ceased to be Independent Director of the Company upon the expiry of second term of his re-appointment, with effect from 12^th August 2022.

viii. Mr. Rahul Kirloskar (DIN 00007319) retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment.

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

b) Changes in Key Managerial Personnel

i. Mr. Atul Kirloskar (DIN 00007387), ceased to be Key Managerial Personnel of the Company, with effect from close of working hours of 31^st March 2023.

ii. Ms. Gauri Kirloskar (DIN 03366274), the Managing Director of the Company, is appointed as the Key Managerial Personnel of the Company, with effect from 20^th May 2022.

iii. Mr. Aseem Srivastav, the Chief Executive Officer (B2C) business vertical of the Company, is appointed as the Key Managerial Personnel of the Company, with effect from 20^th May 2022.

iv. Mr. Rahul Sahai, the Chief Executive Officer (B2B) business vertical of the Company, is appointed as the Key Managerial Personnel of the Company, with effect from 1^st September 2022.

v. Mr. Pawan Kumar Agarwal ceased to be Chief Financial Officer and Key Managerial Personnel of the Company, with effect from close of working hours of 15^th September 2022.

vi. Mr. Anurag Bhagania, the Chief Financial Officer of the Company, is appointed as the Key Managerial Personnel of the Company, with effect from 22^nd September 2022.

Other than the above, there are no other changes in Key Managerial Personnel of the Company in the Financial Year 2022-23.

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 Board of Directors considered that Mrs. Purvi Sheth (DIN 06449636), Mr. Yogesh Kapur (DIN 00070038) and Mr. Satish Jamdar (DIN 00036653) possess the requisite expertise and experience (including the proficiency) and they are persons of high integrity and repute and accordingly recommended their appointment/reappointment as Independent Director(s) which were approved by the Members in the Annual General Meeting held on 11^th August 2022.

Other than the above, there were no other appointment / re-appointment of Independent Directors of the Company in Financial Year 2022-23.

e) Board Evaluation

The Board of Directors carried out a formal review of the performanceandeffectivenessoftheBoard,Committees of the Board and of the individual directors including the Chairman of the Board for the Financial Year 2022-23.

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. The outcome of the meeting was presented to the Board along with the course of actions taken for implementing the observations.

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.

Feedback was sought by way of a structured questionnaire covering various aspects of the Boards functioning such as adequacy of the composition of the Board and its Committees, Board culture, execution and performance of specific duties, obligations and governance and the evaluation was carried out based on responses received from the Directors.

The Independent Directors shared their inputs on effectiveness of the Board processes with the Chairman of the Board.

The Directors expressed their satisfaction with the evaluation process.

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 https://www. kirloskaroilengines.com/documents/541738/2bd3cfb1-7d20-f25a-1163-3a003fd96c15)

g) Number of meetings of the Board

During the period under review, eight (8) 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 A 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.

9. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

During the year under review, the Company has invested in equity shares of Arka Financial Holdings Private Limited, Wholly Owned Subsidiary of the Company and 8.25% cumulative redeemable preference shares of La-Gajjar Machineries Private Limited, Wholly Owned Subsidiary of the Company. 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.

10. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

All related party transactions that were entered into during the Financial Year 2022-23 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 Independent Chartered Accountant. The Audit Committee had granted the omnibus approval for the proposed transactions other than those approved by the Audit Committee from time to time with Related Party during financial year 2022-23, which are reviewed on quarterly basis by the Audit Committee after being duly certified by the Independent Chartered Accountant.

The policy on Related Party Transactions was amended in order to cover the provision of omnibus approval by the Audit Committee and to align with the provisions of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Sixth Amendment) Regulations, 2021. The amended policy on Related Party Transactions 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.

11. RISK MANAGEMENT, INTERNAL AUDIT AND INTERNAL CONTROL FRAMEWORK

The Board recognizes the importance of sound internal controls and risk management practices to good corporate governance. The Board is responsible for the governance of risk and ensures that management maintains a sound system of risk management and internal controls, to safeguard the interests of the Company and its shareholders. All material decisions of the Board take into relevant consideration the nature and extent of risks which the Company is willing to take in achieving its strategic objectives and value creation.

In line with the commitment of a high standard of compliance with accounting, financial reporting, internal controls, corporate governance and auditing requirements and any legislation relating thereto, the Company has a Code of Business Conduct applicable to the Company personnel covering a wide range of business practices and procedures. This includes, but is not limited to, compliance with laws, rules and regulations, conflicts of interests, insider trading, competition and fair dealing, discrimination and harassment, health and safety, environmental matters, record-keeping, financial controls and disclosures, confidentiality, protection and proper use of company assets, financial reporting and compliance.

The Companys internal control system is commensurate with the nature of the business, size and complexity of operations covering all businesses and functions of the organization. The internal control system maintains a repository of internal controls which is tested and updated through its internal audits to ensure that adequacy and effectiveness of all major internal controls.

A risk based audit plan on a yearly basis is approved by the Audit Committee. The audit plan covers all businesses and functions across all locations. Significant observations and progress of implementation of action plan are reported to and reviewed by the Audit Committee.

In addition to this, control self-assessment framework complements the internal audits and helps the employees to monitor the internal controls they are responsible for. This system aids in building robust control environment across the organization.

Both, the internal audit and control self-assessments processes are automated to promote efficient tracking of open audit issues without manual intervention.

The enterprise risks and their mitigation plans are presented by the risk owners to the Risk Management Committee. The Enterprise Risk Management (‘ERM) framework is aimed at effectively mitigating the business and enterprise risks through strategic actions. The mitigation plans for enterprise and business risks are reviewed and updated on a periodic basis to the Risk Management Committee, Audit Committee and the Board of Directors of the Company.

The Companys risk management process is designed to facilitate identification, evaluation, mitigation and review of risks which may affect achievement of 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 Risk Management Committee oversees risk management standards, practices, and systems. The Risk Management Committee periodically reviews the effectiveness of the Enterprise Risk Management system within the Company and evaluates the adequacy and effectiveness of administrative, operating and accounting controls used by the Company.

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

12. 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.

13. CORPORATE SOCIAL RESPONSIBILITY

The Company has always believed in working for the betterment and uplift 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 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 in Annexure A.

14. VIGIL MECHANISM / WHISTLE BLOWER POLICY

The Company has adopted a Vigil Mechanism / Whistle Blower Policy. The Policy provides a mechanism for all directors, employees of the Company and persons dealing with the Company to report to the Chairman of the Audit Committee or Ethics Committee or Ethics Ombudsman 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. The e-learning and awareness on whistleblower policy is made available to the employees of the Company.

The Company adopted online Ethics Helpline to report any suspected violations of code of conduct or any other ethical concerns or raise concern under Whistle Blower / Vigil Mechanism, through email / hotline / webmode. The Company had a tie-up with an independent third party specialist service provider "Integrity Matters" to handle concerns reported. Accordingly, during the year under review, the Vigil Mechanism / Whistle Blower Policy was amended which is uploaded on the Companys website (weblink: https://www.kirloskaroilengines.com/documents/541738/ ec79ef3a-160a-ad2e-6156-55ed1c1058be)

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.

15. EXTRACT OF 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 2021-22 is available on the web-link (https://www. kirloskaroilengines.com/documents/541738/30cc4d8a-4519-756e-e845-e18927b655ac) and the Annual Return for Financial Year 2022-23 will be made available on the website of the Company once it is filed with the MCA.

16. 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, and Rules thereof including amendments thereunder, are provided in Annexure B to this report.

17. 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 C 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.

18. POLICY ON PREVENTION OF SEXUAL 20. AUDITORS

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 work place (Prevention, Prohibition and Redressal) Act, 2013.

Awareness programs are conducted on the POSH during the Financial Year 2022-23. Also, all new joinees at the Company undergo separate induction on POSH policy. Online modules and courses on POSH were carried out which included details of regulatory requirements, Incidents that constitutes sexual harassment, dealing with sexual harassment etc.

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

19. GENERAL

During Financial Year 2022-23:

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

b. 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.

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

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

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

f. 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.

g. Neither any application has been made nor has any proceeding been pending against the Company under the Insolvency and Bankruptcy Code, 2016.

a) Statutory Auditors

The members of the Company in their meeting held on 12^th August 2021, appointed G.D. Apte, Chartered Accountants, Pune, (Firm Registration Number 100515W) as Statutory Auditors of the Company for a first term of 5 (five) consecutive years to hold office from Annual General Meeting held on 12^th August 2021 till the conclusion of the Annual General Meeting to be held in the year 2026.

The Company has received from them 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 2022-23 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 2023-24 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 in Annexure D-1.

There are no adverse remarks / qualifications of Secretarial Auditors in the Secretarial Audit Report for the year ended 31^st March 2023.

Mr. Mahesh J. Risbud, Practising Company Secretary, Pune, has submitted Secretarial Compliance Report as laid down in SEBI Circular No. CIR/CFD/CMD1/27/2019 dated 8^th February 2019 read with circular no. NSE/ CML/ 2023/21 dated 16^th March 2023 and circular no. NSE/CML/ 2023/30 dated 10^th April 2023 issued by National Stock Exchange of India Limited and notice no. 20230316-14 dated 16^th March 2023 and notice no. 20230410-41 dated 10^th April 2023 issued by BSE Limited ("Circulars"), and has also confirmed that the Company has complied with of all applicable SEBI Regulations and circulars / guidelines issued thereunder, for the Financial Year 2022-23.

d) Secretarial Audit of Material Unlisted Subsidiaries

La-Gajjar Machineries Private Limited (LGM) and Arka Financial Holdings Private Limited (AFHPL) are material unlisted subsidiaries of the Company. The Secretarial Audit of LGM and AFHPL for the Financial Year 2022-23 were 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, Pune, (FCS No.: 810 C.P. No.: 185) for the Financial Year 2022-23. The Secretarial Audit Report of AFHPL has been submitted by M/s. Mayekar and Associates, Practicing Company Secretaries, Mumbai, FCS – 2071, COP – 2427, Practicing Company Secretary for the Financial Year 2022-23.

The Secretarial Audit Reports are annexed herewith in Annexure D-2.

There are no adverse remarks / qualifications in the Secretarial Audit Reports of LGM and AFHPL for the Financial Year 2022-23.

21. MANAGEMENT DISCUSSION & ANALYSIS AND REPORT ON CORPORATE GOVERNANCE

The Management Discussion and 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 AND SUSTAINABILITY REPORT (BRSR)

Pursuant to Regulation 34 of SEBI (Listing Obligations and Disclosures Requirements) Regulations, 2015, including amendment thereunder, the Business Responsibility and Sustainability Report (BRSR) for Financial Year 2022-23 is forming 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 judgments 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 31^st March 2023 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 ManagementDiscussion&Analysis,describingtheCompanys 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 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 Kirloskar
Date: 19th May 2023	Non-Executive Chairman
Place: Pune	DIN: 00007387