Kirloskar Oil Engines Ltd Management Discussions

Economic review

Global economy

In CY 2024, the global economy grew by 3.3%, exhibiting resilience amid the volatile global economic landscape. While the advanced economies recorded a growth rate of 1.8%, emerging market and developing economies (EMDEs) witnessed a 4.3% growth rate during the same period. The US economy grew at a steady pace owing to strong corporate earnings and high consumer spending. Europe on the other hand experienced a slower than expected growth due to hurdles in the manufacturing sector. In addition to this, the Middle East and Central Asia grew by 2.4 % whereas, SubSaharan Africa, Nigeria and South Africa grew by 3.8%, 3.1% and 0.8% respectively. On the brighter side, global inflation continued to ease due to aggressive tightening measures implemented by central banks including the US Federal Reserve. In addition to this fall, energy prices have also contributed to the resilient global economic growth.

The continued uncertainties surrounding US tariffs are adversely affecting the credit profile of debt issuers across emerging global markets, such as corporations and financial institutions. However, in the coming years, the global economy is anticipated to demonstrate stable growth, while the EMDEs are anticipated to exceed the growth rate of advanced economies. Further to this, with decline in global inflation level, it is expected that global economic activities will rise. Along with this, the easing of monetary policies is expected to create a more favourable environment for sustained economic growth.1

Indian economy

In FY 2025, India continued to remain one of the fastest-growing economies in the world, with its GDP growing by an estimated 6.5% amid a volatile global economic landscape.2 Along with this, private consumption expenditure remained positive, signalling strong consumer confidence and sustained demand. Additionally, strategic interventions made by the Indian Government further helped in transforming the Indian economy into a business- friendly environment. Initiatives such as the China +1 strategy and ‘Make in India boosted investor confidence. Additionally, these initiatives remained crucial in driving manufacturing activities in the economy. Manufacturing exports, particularly in high value- added components such as electronics, semiconductors, defence equipment, pharmaceuticals, have displayed strength, reinforcing

Indias growing stature in global value chains. Meanwhile, competing labour costs and strategic incentives such as the Production Linked Incentive (PLI) Scheme continued to support growth across various sectors in the Indian economy.

Additionally, in the reporting year, key sectors such as construction, trade, services and manufacturing continued to thrive as pillars of economic resilience. The growth of inward Foreign Direct Investment (FDI) remained strong and was valued at USD 67.73 billion in FY 2025. Further to this, FDI for the manufacturing sector increased in India, therefore, supporting the expansion of manufacturing activities in the economy.

In the coming years, the Indian economy is anticipated to experience positive growth supported by rising consumer demand, improved investment activity and policy support. Moreover, the Indian economy is anticipated to surpass the German economy and become the third largest economy by 2028. Also, the tax relief introduced in the Budget 2025-2026 aims to boost the consumption level, ultimately contributing to the growth of economic activities, including manufacturing activities, in the coming years. Further to this, India is closely observing the evolving global tariff scenario while crafting a calibrated response such that it doesnt impact the economic growth in the coming years. Further to this, multiple global conflicts, especially persisting geopolitical tension, are causing short-term uncertainties to the global manufacturer and supply chain management, leading to disrupted flow of goods and materials. India is closely observing the evolving global tariff scenario while crafting a calibrated response.

Company overview

Kirloskar Oil Engines Limited (KOEL) is a leading manufacturer of internal combustion engines and generator sets, with a strong presence in both domestic and international markets. While it is best known for its leadership in power generation, KOEL also offers solutions in farm mechanisation and water management. The Company manufactures world-class air-cooled and liquid-cooled engines for generator sets ranging from 3 kVA to 12000 kVA and supplies engines for construction, earth-moving, marine applications, mining, rail, fluid handling and Agri segments. KOEL serves a wide array of sectors including residential, telecom, infrastructure, defence, hospitality, data centres, manufacturing, railways, mining, agriculture, and fisheries.

In addition to diesel engines, KOEL provides alternative fuel solutions such as biodiesel, natural gas, Hydrogen Fuel Enhanced Combustion (HFEC) engines and biogas engines. It is among the top global genset brands and has the largest fleet of IoT-connected DG sets. KOEL has a robust global distribution network, with offices in Dubai, South Africa, and Houston (USA). The Companys advanced Research & Engineering Facility ensures compliance with the most stringent emission and noise regulations. Its broad product portfolio spans power generation, industrial engines, firefighting systems, farm equipment, electric motors, and water solutions.

With a strong focus on customer-centric innovation and value creation, KOEL continues to evolve while embedding sustainability across its operations and offerings.

B2B

KOELS B2B business operates primarily in the power solutions space, offering a wide range of products including internal combustion engines, fuel-agnostic gensets, and customised power systems. KOEL caters to critical sectors such as infrastructure, healthcare, hospitality, data centers, defense, and industrial applications both in India and globally. Backed by strong technological capabilities, KOELs advanced R&D focuses on developing eco-friendly, emission-compliant solutions. Its innovations, such as the loT-enabled gensets and the hybrid technology-driven Optiprime series, reflect KOELs commitment to efficiency and sustainability. Complementing its technological strength is a widespread service network of over 450 service outlets and 3,000+ trained professionals, supported by digital platforms like Kirloskar Remote Monitoring (KRM) to ensure proactive maintenance and fast service delivery.

Powergen Business

KOEL is one of the worlds largest power generating set manufacturers. The Company specialises in manufacturing aircooled and water-cooled engines and diesel-generating sets across a wide range of power outputs ranging from 3 kVA to 12000 kVA. The Company maintains a strong customer focus and consistently upholds the highest quality standards. These efforts have helped the Company to secure and sustain its leadership position in the market. The Companys strong Research and Engineering facilities and advanced emission test labs have helped it ensure that its

Indian Powergen Business

The growth in Indias power industry is primarily driven by the growing need of electricity. This ascending need is propelled by rapid urbanisation and a rise in industrialisation. In the reporting year, the electricity demand rose to 250.1 GW, growing at an estimated rate of 4.2% in comparison to the previous financial year. In addition, during the reporting year, the total electricity generated in India was 1,821 billion units, marking a 5% growth from FY 2024.6 products are eco-friendly and comply with the latest emission norms. In addition, the engines and diesel generators of KOEL are certified for stringent noise and exhaust emission norms as per the Central Pollution Control Board, India.

* Fuel Agnostic Gensets

* Energy Storage Solutions

* Dual Fuel Solutions

Global Powergen Business

The global power generation industry grew and attained a market size of USD 2072.06 billion in CY 20244. This growth can be attributed to the rise in power consumption and implementation of supportive policies by governments worldwide aimed at augmenting the energy infrastructure. The year under review witnessed a faster than average rise in the global demand for energy.

The global power generation industry is anticipated to grow at a CAGR of 6.5% from CY 2024 to CY 2025 and attain a market size of USD 2,206.27 billion by CY 2025.5 This growth in the power generation industry is anticipated to be propelled by heightened demand of electricity due to the electrification of railways, development of public transportation and increased adoption of electric vehicles globally. Further to this, the rising demand for cooling solutions to reduce temperature, is anticipated to contribute to the growth of the global power generation industry as well.

Government policies are also playing a crucial role in elevating the demand of electricity in India. Policies, such as, ‘Make in India, Pradhan Mantri Awaas Yojana - Gramin (PMAY-G) and the allocation of H 11.21 lakh crore for infrastructure development in FY 20 267 will further exacerbate the demand for power supply. This presents a crucial opportunity to the players in this sector to capitalise on this demand with their offerings.

Performance of the Powergen Business

With the completion of CPCB IV+ transition, the Companys products are now strictly compliant with CPCB IV+ norms. The Companys innovative capability was highlighted in the enhancement made to the Optiprime series of generating sets. The unique concept of housing two engines and alternators in a single enclosure was well received by the market.

Further, the Optiprime range of generators are anticipated to compete in the HHP segment, thereby presenting KOEL with an opportunity to serve the data centres, hospitality sector and commercial spaces. In addition to this, KOEL has developed in-house genset controllers. These controllers will provide KOEL a strategic advantage and operational flexibility. Additionally, in the coming year, the growth of the genset business of KOEL will be benefited by increased government spendings for infrastructure development. We are the only Company that can provide CPCB IV+ complaint gensets above 800 KW for the Indian market.

Industrial Business

The Industrial engines business segment of the Company provides a range of industrial engines ranging from 20 hp to 1100 hp. These engines are tailored to meet the diverse needs of customers across the globe. KOEL manufactures a variety of diesel engines catering to various Industrial applications across six sectors in the economy. Additionally, the products of the Company are emission-compliant and fulfil Bharat Stage V emission norms.

* Earth Moving

* Construction

* Material Handling

* Agriculture

* Marine

* Defence

* Rail

* Fluid handling

Global Industrial Business

The global industrial sector remains robust, with key industries, such as construction, mining, railway, defence, nuclear, marine, agriculture and fluid handling poised for significant growth. The global industrial engines industry attained a market size of

USD 436,195.96 million9 in CY 2024. The industrial engines serve as a critical component by powering machinery in construction, mining, agriculture and manufacturing industries. During the year, the global industry experienced rapid evolution supported by advancements in technology and increased demand across different sectors. In addition, the integration of the Internet of Things (IoT) and Artificial Intelligence (AI) has emerged as a significant trend as it enables real-time monitoring, predictive maintenance and enhanced operational efficiency. Moreover, the industry experiences diverse regional growth depending on the level of industrialisation and infrastructural development. The Middle East and African region displayed growth potential supported by rise in the investment for in energy and mining. In addition to this, North America remained a dominant player, supported by growth in the construction and mining activities. In addition to this, the Asia-Pacific region remained the fastest-growing region for industrial engines, driven by rapid industrialisation and infrastructure development.

The overall market scenario remains positive, with a strong outlook for the future, driven by increased infrastructure spending, technological advancements and the push for sustainable solutions. Further, the global industry is anticipated to grow at a CAGR of 5.1% from CY 2025 to CY 2033 and attain a market size of USD 682,505.4 million by CY 2033.10 In addition to this, the North American region will experience increased demand for advanced engine technologies to remain aligned with its rigorous emission regulations.

Indian Industrial Business

In FY 2025, the Indian industrial segment was expected to grow by 6.2%, driven primarily by strong growth in power generation and construction activities.11 During the reporting year, the Index of Industrial Production grew by 2.9%, with sectoral contributions led by electricity (6.2%), manufacturing (3.0%) and mining (2.6%). The competitive landscape of Industrial business underwent rapid evolution, influenced by both domestic initiatives and international collaborations and a concerted push towards self-reliance across multiple sectors. This positioned all competing players in the industry to effectively meet the evolving demands of both domestic and international markets. The manufacturing sector remained a preferred destination for Foreign Direct Investment (FDI), owing to factors such as a large domestic market, skilled workforce, strategic proximity to key global trade routes and ports. Moreover, relevant government policies and schemes such as the Production Linked Incentive (PLI) scheme and repositioning of global supply chains under the China+1 strategy have further augmented the growth of the Indian manufacturing sector. Additionally, the Make in India initiative introduced by the Indian Government to strengthen the domestic manufacturing sector will further create demand for industrial engines across sectors such as Defence, Nuclear and Rail.

In the years ahead, the PLI scheme along with a series of structural reforms, such as corporate rate cuts, investment incentives and heightened infrastructure spending will augment the production and manufacturing activity in India. This heightened activity will integrate the nation into the global supply chain. Further, the construction and mining industry is expected to grow to support the growing needs of infrastructure. All factors combined, the demand for industrial engines is expected to witness a positive trajectory of growth.

Performance of the Industrial Business

During the reporting year, the Industrial business unit exhibited strong growth. This growth was supported by strategic innovation, cost management and market diversification. The Industrial business unit has achieved H1,132.8 Crore despite industry challenges. KOEL has launched the CEV BSV compliant engines in the power range of 49HP, 74.5HP and 110HP for application in construction sector. KOEL has further enhanced engine-powered product portfolio by completing development of 130 HP, CEV BSV engine. The Industrial business segment of the Company remained focused on channel growth, aiming to strengthen its business acquisition initiatives. During the year under review, KOEL has upgraded all its engines from CEV-BSIV to CEV-BSV applications within the stipulated time and the OEM could successfully launch their products in the Indian off-highway market

The outlook for the Industrial engine business segment remains promising, supported by substantial growth opportunities across multiple segments. Strategic investments in technology, adherence to environmental standards and active participation in government initiatives will be crucial in order to capitalise on these prospects. By aligning with the national priorities and global trends, KOEL is anticipated to strengthen its position in both domestic and international markets. The Industrial Business Segment of the Company remains focused on the development of new products across various segments to expand its product portfolio and meet the market demand. The Company is developing HHP series engines and 400 HP series engines required for rail maintenance applications. In addition to this, the Company has also initiated the supply of 500KVA CPCB4+ diesel alternating sets for Power Car application in Indian Railways. KOEL has developed new ratings for firefighting applications. This is anticipated to pave the way to more opportunities of growth for the industrial engines segment.

Distribution and Aftermarket Business

The Distribution and Aftermarket business of KOEL is focused on consistently delivering its customers a seamless and smooth experience through its services and products. The deep understanding of customer expectations remains an integral component for the Company. This helps the Company to ensure that the services offered are aligned to the evolving needs of the consumers. The Distribution and Aftermarket business of the Company is categorised into Service channel, Direct channel and Retail channel.

Key Channels *

* Service channel

* Direct channel

* Retail channel

Distribution and Aftermarket Business

Performance of Distribution and Aftermarket Business

During the reporting year, the Distribution and Aftermarket Business Unit generated a revenue of H 843 crore compared to the H 749 crore generated in the previous fiscal. This growth can be attributed to the launch of new products, improved service penetration, augmented market share and improvement in the assured customer retention index.

Implementation of stringent emission norms in the power generation and construction equipment vehicle industry will present the Company with an opportunity to enhance its service penetration. Some of these services include offerings such as Remote Monitoring Services and Diagnostic Support. In addition, the Company is expected to enhance its offerings and diversify its retail channel across Eastern and Southern India. Along with this, the key account management is expected to help the Company grow its distribution and aftermarket business through improvement in share of wallet of the business from key customers.

Service Channel

The Kirloskar CARE brand is well acclaimed for its strong after sales service for Kirloskar Powergen and Industrial products. The Company has a strong and digitally connected network of service outlets with trained service personnel across India. The Company has placed significant emphasis in ensuring proper training of its technicians and consistent availability of necessary diagnostic tools and parts across the channel.

In alignment with the evolving market trends, including the wide use of industrial engines and shifting diesel generator set usage patterns, the Company strives to restructure its service channel. The Service Dealer optimisation strategy will enable the dealer partners to become self-sufficient and viable and help KOEL to support its aspirations for providing services to its customers. The Companys innovative service offerings, such as Bandhan (Branded AMCs for Retail Customers) and Extended Warranty are developed to ensure long term customer retention.

The Company has been utilising its state-of-the-art Rapid Response Centre to remotely monitor and track the performance of its CPCBIV+ Gensets in the field through remote monitoring. This has helped the Company to serve its customers better through proactive and timely addressal of issues. An upgraded Regional Capability Centre was inaugurated by the Company at Bangalore. This was established to provide training to the technicians in order to keep them aligned with ongoing technological advancements in the products of the Company. The Company also plans to upgrade the Regional Capability Centres at Delhi and Kolkata in FY26.

Direct Channel

The direct channel comprising a strong workforce team, was established to offer differentiated support and services to its key account customers. KOEL has introduced a re-manufactured line of products, called Kirloslar Nulife. Through this line of products, the Company aims to offer its esteemed customers lower operational costs and reliable products. These products are backed by factory-built warranty terms and the Company ensures complete aftermarket support. Further to this, the Kirloskar Nulife brand helps the Company to upgrade its genset to the current emission norms without having to invest heavily in a new Genset.

Retail Channel

The Retail Channel sells spare parts for agriculture and construction equipment and other allied products. During the year under review, KOEL has introduced multiple new parts such as Filters, Fast Moving Consumables, Batteries, Fluids and other spares related to Agriculture and Construction Equipment Vehicles. Further, the retail channel comprises a large chain of distributors with access to local retailer outlets. In the years ahead, KOEL will focus on optimising its resources and strengthening its distributor network in order to support its growth ambitions.

International Business

Performance of International B2B business

The international presence of the Company has expanded significantly with positive export in Southeast Asia, Europe, the Middle East and Africa. To expand its international business and in the existing markets, KOEL expanded its global team and enhanced the engagement with customer. To enhance its presence in the marine business, the Company ventured into the UAE and finalised marine business dealers in South Africa, Bangladesh and the UAE. Further to this, the Company remained focused on its product development and in the reporting year, it developed new products catering to the coal mining across the African region. Further to this, KOEL also launched the Optiprime Dual Core 1000 kVA generator and it is the worlds smallest footprint for a 1000 kVA genset. A significant portion of KOELs revenue came from its overseas Powergen business, particularly in the Middle East and Northern Africa (MENA), Sub-Saharan Africa and Asia-Pacific (APAC) regions. We are now executing HHP orders also in the international markets.

Throughout the reporting year, the Company remained focused on strengthening its presence in its key regions. KOEL is also exploring growth opportunities across African region through expanding its presence and implementing relevant strategies. On the industrial engine front, KOEL is developing engines for construction activities as well as UL/FM approved engines for firefighting. With a strong focus on both domestic and international markets, KOEL is solidifying its position as a trusted leader in engine and power generation business segment.

Strengths

• The B2B business segment of the Company offers a diverse range of products. The products are carefully tailored to the needs of the customers. This approach helps the Company to retain and build strong relationships with its customers.

• KOEL has a long legacy of being one of the worlds largest manufacturers of power generating sets. The Companys strong focus on R&D helps it to maintain a significant position and enables it to evolve consistently to meet the shifting needs of the industry.

• The constant effort to new markets globally has facilitated an increase in its international sales.

• The digitally connected state-of-the-art manufacturing facilities enable the Company to offer superior-quality products, enhance operational efficiencies and further strengthen its B2B business segment.

Opportunities

• In the Budget Estimates, the capex expenditure has been allocated 3.1% of the GDP12. This is anticipated to boost infrastructural development across India, thereby creating demand for the B2B business of KOEL.

• The China+1 strategy, which is globally agreed, will lead to growth in the manufacturing activities within India, thereby creating growth opportunities for power generator solutions, industrial engines and aftersales services.

Risks

• KOELs B2B business segment needs to comply with the evolving emission norms. Failure to do so can lead to non-compliance penalties, revenue loss and most importantly, weaken its position in the industry .

• Inability to maintain a stable supply chain to support its operations will negatively impact KOELs procurement of raw materials and components.

• The B2B business of the Company operates in a highly competitive environment where the industry is shaped by rapid innovation and differentiation pressure. Failure to stay ahead of the competition can weaken the Companys position in the industry.

Threats

• Aggressive trade policies, along with increased import tariffs and carbon taxes, have impacted the industrial sector, thereby undermining the competitiveness of Indian manufacturers in international markets.

• Entry of new low-cost players within the automotive industry is a huge challenge, as the availability of cheaper alternatives can undermine KOELs position in the Power genset industry.

B2C

The B2C segment of KOEL is engaged in providing water management systems and farm mechanisation products. The Company focuses on providing affordable and reliable products and caters to the demand of water pumps and farm machinery in the agricultural sector. Generally, under the B2C business segment, the consumers convenience is prioritised while maintaining its sales The Company also offers after-sales services and customer support, which leads to strong customer relationships and increased customer retention. In FY 2025, the B2C segment of the Company demonstrated a net total revenue growth by 2% in comparison to the previous financial year. Additionally, in FY 2025 new products such as MMB - AdvantACE and VSWA, variants in Industrial Monoblock 0.5 to 2HP, Sewage Pumps series from 1 to 10HP, Inline circulation pumps and motors were introduced.

Water Management Solutions (WMS)

Kirloskar pump sets have been in use among the farmers to draw water and irrigate their fields, making it very popular in rural India. The WMS business segment of KOEL offers a variety of products for agriculture and commercial usage. The water solution verticals offer long-lasting product lines, including Diesel engine and pump sets and electric pump sets. Moreover, the Company is known for its leadership position in the diesel engines and pump sets industry.

• Diesel Engines

• Electric Pumps

• Engine-Based Pumpsets

Global WMS

The global agricultural pump industry attained a market size of USD 5.74 billion in CY 2024.13 This growth in the global industry was propelled by the global rise in population, driving the demand for agricultural productivity and efficient irrigation solutions. The need for agricultural pumps witnessed a global rise due to the need to optimise water use in areas experiencing erratic weather patterns and scarce water resources. The end users generally consisted of small to large-scale farmers, agricultural cooperatives and farm management globally.

In the coming years, the global agricultural pump industry is anticipated to grow at a CAGR of 7.18% and attain a market size of USD 8.75 billion by 2030. This expected growth in the global industry will be supported by a global shift towards sustainable farming practices.

Indian WMS

The Indian pumps market is highly fragmented, with large number of manufacturers catering to various end-user sectors. Among these, the small-scale units in the unorganised sector caters to the agricultural and domestic needs. The Indian pump industry can be divided into surface suction pumps, submersible pumps and floating pumps. Among them, the submersible pumps are the preferred choice in the agriculture sector. It held the highest share in the Indian Water Pumps industry during the reporting year. Additionally, with a significant portion of Indias population dependent on agriculture for livelihood, efficient water management is crucial for crop cultivation, the agriculture segment holds the highest share in the India Water Pumps Market in terms of end usage.

In the coming years, the Indian agricultural pump industry is anticipated to grow until 2028, driven by increased technological advancements and expansion in solar pump installations. Additionally, the industry is anticipated to benefit by the integration of smart technologies such as IoT and AI in water pumps that will support real-time monitoring and control of irrigation systems, improving water use efficiency and reducing operational costs.

Performance of WMS

During the reporting year, the Water Management Solutions Business Unit generated a revenue of H 542 crore compared to the H 508 crore generated in the previous fiscal.

Farm Mechanisation Solutions (FMS)

The FMS uses machinery to improve productivity and efficiency in the agriculture sector. Our Farm Mechanisation products created to empower small and marginal farmers with innovative farm machines are sold under the Kirloskar Brand. We follow the procedure of gaining a deep understanding of farmers needs before the development of new products. The Company has rich expertise in engineering innovative solutions catering to the requirements of the agricultural sector.

* Power Tillers

* Power Weeder

* Rotary Tiller

* Hand-Held Tools

* Mechanised Implements

Global FMS

Historically, the global Farm machinery and equipment industry experienced strong growth and in CY 2024, it attained a market size of USD 221.3 billion.14 This growth in the global industry can be attributed to rising food demand, labour shortages and advanced technologies like precision farming and autonomous machinery. Moreover, the integration of advanced farm machinery offered various opportunities to the farmers by allowing them to ensure real-time monitoring and reduce time, as well as effort and yet attain a higher yield.

In the coming years, the global farm machinery and equipment industry is anticipated to experience strong growth and by CY 2029, it is anticipated to attain a market size of USD 295.1 billion.15 This growth in the global industry is expected to be supported by precision agriculture advancement, data analytics and adoption to sustainable farming practices.

Indian FMS

The Indian agricultural machinery industry includes various tools and irrigation systems that help in improving farm efficiency and agricultural productivity. In the reporting year, the government remained focused on encouraging the farmers to adopt advanced technologies, such that it led to enhanced farming efficiency and productivity by mechanising processes. Initiatives such as Pradhan Mantri Kisan Samman Nidhi and subsidies for agricultural machinery purchases have also encouraged farmers to adapt to advanced technologies.

Further to this, increased adoption of farm mechanisation solutions will minimise waste in the agricultural output. Additionally, the migration of rural workers to cities, supported by growing urbanisation in India, is creating a shortage of rural labourers and this is anticipated to increase the investment for machinery to improve cost efficiency. In addition to this, the growth in the Indian farm mechanisation industry is expected to be supported by expansion in the services offered by Agtech industry and supportive government policies.

Performance of FMS

During the reporting year, the Farm Mechanisation Solutions Business Unit generated a revenue of H 48 crore compared to the H 87 crore generated in the previous fiscal.

International Business

International Performance of KOELs B2C business

B2C business segment of KOEL is present internationally, offering a wide range of products and services related to WMS and FMS. During the reporting year, International B2C Business Unit generated a revenue of H 49 crore compared to the H 29 crore generated in the previous fiscal.

Strengths

* Leveraging its brand trust and market leadership, KOELs WMS business is well established with a diversified product portfolio.

* The Companys B2C business segment boasts a strong distribution channel across India with a well- connected rural network.

* KOELs B2C business segments offer products that are specially built to meet the need and affordability of small and marginalised farmers.

Opportunities

• With the growth of the Agriculture sector, urbanisation industrial and manufacturing expansion there will be demand for reliable water supply and efficient irrigation facilities, thereby, offering growth opportunities for KOELs B2C business.

• In alignment with technological advancements, focus on energy efficiency focus and digitalisation, growing opportunities in the export market are anticipated to promote innovation in the B2C business of KOEL, thereby supporting its growth and profitability.

• The international expansion of the B2C business segment is offering KOEL further growth opportunities to diversify its revenue-generating streams through leveraging on its strong product innovation and manufacturing capabilities.

Risks

• WMS of KOEL operates in a competitive business environment where a large number of unorganised players are present, pressuring pricing and market share of the Company despite its organised distribution.

• The growth in the B2C business of the Company is related to the change in the rainfall pattern of the country, therefore, resulting in revenue volatility.

Threats

• Price pressure from the unorganised sector and volatile raw material prices pose an immediate challenge for KOELs B2C business segment by undermining its cost efficiency and production level.

Supply Chain

KOEL strives to create resilient supply chain facilities for its raw materials and finished products, such that it meets the evolving demand of consumers. The Company sources around 90% of its raw materials from local suppliers, which protects it from global uncertainty. This practise enables the Company to maintain better control over quality, cost and delivery across its supply chain. The Company focuses on building a future-ready supply chain that is digitally connected and is flexible with respect to the technology, quality, delivery and cost requirements. In the reporting year, the Company has also explored alternative suppliers to meet the requirements of its technology and cost structure. Further to this, the Company remained focused on reducing the power usage at the supplier base and promoting innovative programs like Zero Fettling, thereby reducing workers tiredness and creating a safe working environment while improving product aesthetics to international standards. In addition to this, KOEL has also launched a unique programme for suppliers for multiple KPI monitoring and predictive analytics. The chosen cluster method aligns with other initiatives aimed at promoting an analytics culture driven by data at the supplier end. Moreover, KOEL remains focused on its planned path to zero defects, which is also benefiting its supplier base also helping in the steady improvement of quality indices.

Human Resource

The Human Resource Management System (HRMS) of the Company helps KOEL to maintain a positive and harmonious relationship with its workforce. In the reporting year, the total workforce of the Company was 2,476. The Company has implemented various initiatives to improve employee attraction, engagement, development, health, safety and wellness, recognising employees. Additionally, the Campus to Corporate programme helps the Company onboard the right candidates to the workforce. KOEL offers its workforce multiple opportunities to upskill themselves and stay relevant to the evolving trends in the industry. During the reported year, key upskilling programmes focused on enhancing managerial skills, as well as helping the channel partners and engineers to build their competencies were implemented. The Company has an established leadership development programme to support building the future leaders.

As part of its learning and development programme, KOEL supported technology upskilling and carried out career progression initiatives to encourage its workforce. These efforts led to enhanced service delivery and strengthened customer engagement, thereby establishing trust and long-term partnerships.

Further to this, in the reporting year, the Company completed its 11th wage settlement, highlighting its efforts to implement best practices in Industrial relations. Additionally, the Recognition and Rewards (R&R) policy of the Company recognises and acknowledges the contribution and efforts of its workforce by rewarding them on a quarterly basis. In addition, the Company continuously reviews its compensation and benefits practices, wherein the Flexi-Basket Compensation structure and the Car Lease programme have been introduced to ensure employee retention. Additionally, in the reporting year, policies like Business Travel Policy, No-Punch Policy, Paternal Leave Policy, Attendance and Leave policies were introduced. Further, various employee engagement activities such as Environment Day, National Safety Day were arranged to promote a healthy and positive working environment for its employees.

Environment, Health and Safety (EHS)

Environment

Kirloskar Oil Engines Ltd. (KOEL) has implemented a comprehensive range of environmental conservation initiatives, reflecting its commitment to sustainability across its operations.

Sustainable Manufacturing and Energy Efficiency

KOELs Kagal plant exemplifies its dedication to sustainable practices. The facility is CII GreenCo Platinum certified and has achieved carbon neutrality. It sources its energy from renewable sources through captive solar power plant and third party energy purchase. Additionally, the plant has implemented a plastic- to-fuel conversion unit, contributing to waste reduction and energy efficiency.

Water Conservation Efforts

KOEL has made significant strides in water conservation, with the Kagal plant generating 58% of its own water. Initiatives such as water recycling and reuse have not only reduced consumption but also improved the water table in surrounding communities.

Innovative Waste Management

The Company has introduced the Kirloskar i-Land, a fully automated organic waste composter that utilizes biotechnology and intelligent engineering to convert organic waste from homes and commercial spaces into compost.

Environmental Policy and Governance

KOELs Environmental, Social, and Governance (ESG) policy emphasises minimising environmental impact through sustainable operations, efficient resource utilisation and compliance with environmental regulations. The policy also focuses on effective water management and energy conservation measures.

Health and Safety

At Kirloskar Oil Engines, the health and safety of its employees, contractors and stakeholders forms the fundamental business value and a vital component of its operational strategy. KOEL remains focused in promoting a safe and healthy work environment across all its facilities and operations, thereby ensuring compliance with all applicable legal and regulatory requirements. The holistic approach to employee wellbeing of the Company includes periodic medical checkups, ergonomic assessments, mental health awareness programmes and workplace hygiene inspections, all aimed at promoting the overall health and wellbeing of our employees. Additionally, the Company also celebrates International Yoga Day to encourage physical and mental wellness through yoga.

Kagal Plant

In the induction process, the employees are made aware of the various workplace hazards and countermeasures. This ensures that newcomers are aligned with the health and safety protocols of the Company. Along with this, the Company conducted various safety training programmes focused on safety measures against fire, using first aid kits during emergencies, the importance of using personal protective equipment and safe handling machines and tools.

Khadki Plant

To ensure the health and safety of its employees in the workplace, the Company has implemented various safety measures, which encompasses the installation of flameproof lights and a gas leak detector system.

Rajkot Plant

The Company organised blood donation camps, health awareness sessions and mock drills to contribute to maintaining health and safety within its working environment.

Nashik Plant

The Company conducts activities to spread awareness about how to overcome workplace hazards. These activities include safety talks, providing training against fire, health awareness sessions, mock drills to build a safe workplace for its workers.

Bhare Plant

Achieving an incident-free workplace is central to our mission, fueled by a dynamic safety culture. Were boosting safety awareness via focused training programs and implementing impactful new safety initiatives to empower our team. Key priorities include robust hazard identification and a thriving near- miss reporting culture, turning every learning into future accident prevention. Our collective efforts are building a safer future.

Health Initiatives

KOEL recognises the necessity of promoting employee wellbeing and has implemented various health initiatives across its facilities. Some of its efforts include first aid training, annual medical checkups, awareness sessions on health topics like Gastroesophageal Reflux Disease (GERD), spinal health and diabetes management, as well as health camps for cardiac screening and eye check-ups.

Engineering

The Engineering division remains a critical component of the Company, driving the growth and helping the Company to maintain its leadership position. The Corporate Research and Engineering (CRE) and Application Engineering (AE) department focuses on enhancing the Companys technological leadership in research, design and development of engines and development of customised engineering solutions. In addition to this, the CRE focuses on the design and development of its product portfolio such that it aligns with the long-term growth targets, market demand and prevalent trends in the industry. Such R&D activities helped the Company to produce a wider range of diesel and gas gensets, develop MicroGrid solutions and gensets and Optiprime controllers.

* Diesel engines in the high horsepower range

* Expansion of gas engines

* Technology for dual fuel/fuel blends

* Compact gensets with 3000 rpm engines in the lower power segment

* Executing our technology tracks - Internal Combustion Engines, Energy storage solutions, Electrification and Fuel cells and electrolysers.

Engineering initiatives in FY 2025

• New product development

i. To cater to industrial applications, the Company developed the CEV BS V product range, aligned with the upgraded emission norms for construction equipment vehicles.

ii. In the genset segment, the Company enhanced its aircooled engine-powered product portfolio by completing development for the HA294 CPCB-IV+ 15 kVA rating.

• Existing Product Development

i. KOEL completed the production ramp-up for the new CPCB-IV+ emission norms and upgraded all applicable engine platforms to CPCB-IV+ development.

ii. The Company also developed a new PV16-15 L inline series engine equipped with an advanced aftertreatment system, power cylinder, and fuel injection equipment, designed for powering 500 kVA CPCB-IV+ CE compliant genset products and 600 hp industrial applications.

Finance, Legal and Secretarial

The Companys financial, legal and secretarial departments prioritise regulatory compliance and provide support for corporate planning and analysis. The legal and secretarial department has developed a strong compliance management system and implemented digital projects to boost productivity. It has improved commercial partnerships, digitalisation and governance.

The Finance department analyses financial and operational data before the implementation of strategic decisions. The department helps manage capital allocation and ensures resources are used effectively to achieve company goals. It manages business performance through financial reporting, variance analyses and cost management, aiming to improve profitability and strategic planning.

Financial Performance of the Company

Rs in Crore

Particulars	FY 2025	FY 2024
Revenue from Operations	5,113.33	4,850.54
EBITDA	653.74	566.78
Profit before tax	579.94	486.84
Profit for the year	431.93	361.63
Net Worth	2,975.63	2,622.69

Key financial ratios

	FY 2025	FY 2024
Debtors Turnover (no. of days)	8.3	9.3
Inventory Turnover (no. of days)	6.6	6.5
Interest Coverage Ratio (in times)	41.8	56.1
Current Ratio (in times)	1.7	1.4
Debt Equity Ratio (in times)	0.06	0.08
EBITDA Margin (in %)	12.8%	11.7%
PAT Margin (in %)	8.4 %	7.4%
Return to Net Worth (in %)	15.4%	14.6%