Kirloskar Pneumatic Company Ltd Management Discussions

J From Singularity to Continuous Growth and Expansion

The Big Bang theory on the Origin of the Universe as first proposed by Georges LeMaitre who determined if the universe is expanding and cooling, it must have been compacted and hot in the past. Evidence supporting the big bang theory includes the Hubble-LeMaitre law. The Universe emerged from a hot and dense singularity in a rapid expansion and cooling process that continues till this date - for over 13.8 billion years now! *

Kirloskar Pneumatic Company Limited (“KPCL”) too started as a single product company many years back at one location; one small plant. And today it is rapidly expanding with multiple plants, diversifying into new products, new markets and new geographies. It continues to grow, providing Cooling for its customers; providing cleaner energy options and generally making things bigger, better and productive. Handling Pressure profitably remains our ethos.

As with the expanding universe governed by its laws; we too at KPCL have a strategic architecture that governs and controls our successful expansion - in scale and size. What are the KPCL ‘laws of growth?

1. Focus on Compressors and Compression systems for Air, Refrigeration and Gas. Thats the core domain that we seek to work on.

2. Growth based on building sustainable competitive advantage that are unique and valuable to our customers.

3. Leadership in innovation, manufacturing excellence and cost competitiveness.

4. Focus on the domestic market to achieve scale. Aspire for global presence later.

5. Be the employer of choice having the largest number of engineers in this industry.

How Do We Implement Our Laws of Growth

1. Building the best suite of product offerings to our Customers

In Air Compressor Division: Be it the best in class Tezcatlipoca range of centrifugal compressors; the Aria range of cost competitive Screw compressors based on frugal engineering, be it the workhorse Reciprocating compressor systems for LPG, Air separation, material conveying or for Shop air; be it the ubiquitous Screw.

In Refrigeration compression: The only Indian company that builds a range of Refrigeration compressors - be it the Ammonia refrigerant reciprocating compressors for the cold chains, Ice plants and dairies; the Khione range of Screw compressors that can work on a range of refrigerants, the Tyche semi-hermetic compressor etc. We build refrigeration packages as well as assist local OEs to build packages with our compressors.

In the Gas compression space: We have the widest range of gas compression packages with multiple compressor offerings; with Ariel compressors for the Upstream, Midstream and Downstream plants; with the Kirloskar KG series for on line gas stations and with the Calana boosters for the off-line. The newer asks in the space of Hydrogen compression as well as Biogas compression are met with PDC LLC and Jarilo compressors respectively.

2. Offering Engineered solution best suited for each customer needs

With over 200 engineers and the most modern design and engineering software we offer customised solution that are best suited for each application. The packages are designed, built, tested, installed and maintained by our team ( in most cases ). Near 80% plus of all our business is from ‘Built to order showing the high level of customisation.

3. Innovation

We file 20 IPs a year. The whole process of identifying needs, building unique offerings, registering the Design / IP is an evolved process that allows us to offer superior products and services to our customers on an ongoing basis. This ensures that the company is not dependent on acquiring know-how but can create its own products.

4. Owning the value-chain

Manufacturing in most cases had moved to ‘sourcing and assembly - at best. Here the compressor industry has today a supply chain of over 7000 Km and more. Key elements like Rotors for Screw compressors, Impellers etc., are all imported. At KPCL, we design, we Forge, fabricate, cast, machine, grind and assemble all our compressors - in-house. Our supply chain at best is across our 3 plants at Nashik, Saswad and Hadapsar - within 200 Km!

This gives us a better handle on costs, time / speed of execution and customisation.

5. Technology

At KPCL, most of our compressors and compression systems are ‘smart machines - they help customers to operate and maintain them better. Manufacturing plants are all with modern connected machines; working on Industry 4.0 practices; digitalisation across all functions have made the processes seamless and predictable.

6. People process

At KPCL, we are proud of our team. The recognition of the robustness of our HR process comes from our winning the CII - HR Excellence award for 5 years in a row with a score of over 600. We have a strong L&D process that allows us to develop and nurture talent ideal for our business, with attrition rates in single digit - lowest in this area and industry - we continue to work to become the employer of choice.

7. Governance

At KPCL, the bed rock of all our activities is our Values. We live by it in all that we do.

Our Values

* Excellence: In everything we do, quality without compromise.

* Integrity: Say what we do and do what we say.

* Collaboration: We grow with people and partners.

* Empathy: We always listen and learn.

* Value Creation: Were building for a shared prosperous future.

* Innovative Thinking: Be bold and brave and stay relevant.

Investor communication, high standards of disclosures and transparency, conservative financial management and strict adherence to law are consistently practiced.

As with the expanding universe, so too will KPCL grow - surely, consistently and predictably.

Economic Overview

Global Economic Overview and Outlook

After enduring a prolonged and unprecedented series of shocks, the global economy appeared to have stabilised, with steady yet underwhelming growth rates. However, the landscape has changed as governments around the world reorder policy priorities and uncertainties have climbed to new highs. Forecasts for global growth have been revised markedly down compared with the earlier outlook, reflecting effective tariff rates at levels not seen in a century and a highly unpredictable environment. Global headline inflation is expected to decline at a slightly slower pace than what was expected earlier.

Intensifying downside risks dominate the outlook, amid escalating trade tensions and financial market adjustments. Divergent and swiftly changing policy positions or deteriorating sentiment could lead to even tighter global financial conditions. Ratcheting up a trade war and heightened trade policy uncertainty may further hinder both short-term and long-term growth prospects. Scaling back international co-operation could jeopardise progress toward a more resilient global economy.

At this critical juncture, countries should work constructively to promote a stable and predictable trade environment and to facilitate international cooperation, while addressing policy gaps and structural imbalances at home. This will help secure both internal and external economic stability.

The anticipated shift in global trade and tariff policies, following the US imposition of trade barriers, has unsettled the emerging markets, including India. However, India has built defences to combat global shocks. Healthy growth, low CAD and external public debt and adequate forex reserves provide policy flexibility, but do not insulate the country from adverse global developments.

Indian Economic Overview and Outlook

The global trade landscape is undergoing significant transformation, marked by a rise in protectionist policies. With the current uncertainty around reciprocal tariffs and shifting trade dynamics, it remains to be seen how the situation will stabilise. Despite these headwinds, India will remain resilient. India, the fastest-growing major economy in the world, has a strong domestic demand accounting for nearly 80 percent of its GDP—primarily consumption and investment. The country is on track to become the worlds third-largest economy by 2027, fueled by a rapidly expanding consumer base. By 2030, an estimated 140 million households are projected to join the middle class and 20 million are expected to enter the high- income segment. This shift will drive spending on essentials to increase by 2-2.5 times and spending on services by 3-4 times, with total consumer expenditure anticipated to rise from US $ 1.9 trillion to US $ 5.2 trillion.

At the same time, India has made significant investments in infrastructure over the past decade, focusing on expanding and modernising its physical assets. Given the strength of its domestic economy, India is well-equipped to withstand external trade disruptions. The country has steadily built a robust foundation that positions it for continued growth— regardless of volatility.

The Indian economy is expected to grow in the mid-6% range in FY 2026, supported by strong domestic consumption, a more accommodative monetary policy stance and sustained public and private investment activity. Private consumption is projected to strengthen further due to lower inflation, income tax relief measures and improving labour market conditions. Public infrastructure spending will remain elevated, complemented by a revival in private sector capex across manufacturing, renewable energy and services sectors. Over the medium term (FY 2027 and FY 2028), growth is anticipated to remain in the 6%-7% range annually, underpinned by high infrastructure investment, expanding private sector activity, robust domestic consumption and a resilient services sector. Structural reforms, digitalisation and improvements in human capital are expected further to reinforce Indias medium-term growth prospects despite external uncertainties.

Manufacturing showed a gradual recovery after a weak start, supported by strong domestic demand, rising capacity

utilisation and investments under the governments Production-Linked Incentive ‘PLI schemes. Public capital expenditure remained a key growth catalyst, with the Union Governments capex allocation rising to 3.4% of GDP, focused on infrastructure sectors such as roads, railways and energy. Overall, India maintained its position as one of the fastest- growing major economies, driven by domestic fundamentals amid a challenging global environment.

In fiscal 2026, growth will be supported by easing monetary policy and government measures to boost private consumption. The budgeted 10.1% increase in government capital expenditure (capex) will also be supportive.

The governments post-pandemic strategy of providing extraordinary support to investments via budgetary spending has paid off, with fixed investments the key driver of GDP growth until fiscal 2024. Now, there is a greater shift in policy strategy towards incentivising private corporate investments. While central government capex remains supportive, the focus should also be on reducing cost and time overruns. As of December 2024, 63.7% of central sector projects totalling C 150 Crore and above had time overruns, higher than the 29.8% of projects on time and 41.1% of projects faced cost overruns. Here, creating a pipeline of shovel-ready projects and better coordination with states will help get the best bang for the buck.

Reducing time and cost overruns will be critical for meeting the capex target. As per the revised estimates, the central government missed its capex target for fiscal 2025 by 8.3%. State capex has also lagged in fiscal 2025. During the first nine months of fiscal 2025, capex of 16 major states stood at C 4 lakh Crore, which is 47.4% of the budget target.

With the government normalising capex, it is time for the private sector to take the lead in furthering the investment momentum. The ability of private corporates to invest is supported by their deleveraged balance sheets, the healthy balance sheets of lenders and turning of the interest rate cycle. The government is also taking steps to encourage investments by the private sector. Total allocation for the PLI schemes is budgeted to rise 87% on-year in fiscal 2026, particularly in sectors such as electronics, textiles, automobiles and components. Efforts at deregulation will help, too.

Corporate investments will increase gradually as the government has taken steps to address domestic demand and ease conditions for the private sector to invest, amid heightened global uncertainty. The share of private corporate investment in total fixed investment saw a sustained decline to 34.4% in fiscal 2024 from its peak of 41% in fiscal 2016, following a steady climb from ~33% in fiscal 2012. A revival in private corporate investment will need to be accompanied by faster growth in machinery and equipment (or capacity addition) and intellectual property creation (or innovation). The nature of private corporate investment has also seen a shift in recent years, which the Economic Survey 2023-24 notes as an ‘unhealthy mix (see box: ‘Changing trend in private corporate investment).

Indian Economy Outlook

Over a seven-year period (fiscals 2025-2031), we expect India to sustain average GDP growth of 6.7%. This, over a similar growth rate seen in the pre-pandemic decade 2011-2020, is expected to compound the gains for the economy. Corporate Indias revenue growth is expected to improve to 7-8% on-year in fiscal 2026 vs ~6% in fiscal 2025, closing in on the decadal average of ~8% growth as seen during fiscals 2016 and 2025. This will be led by healthy growth in consumption sectors such as organised retailing, fast-moving consumer goods (FMCG), consumer durables, airlines and two-wheelers. In industrials, revenue growth momentum will sustain on the back of auto components and chemical industry. Auto component revenue is forecast to grow 10-12%, the same pace as in fiscal 2025, owing to healthy demand from original equipment manufacturers (OEMs), followed by replacement and export markets. Chemical sector revenue growth will increase a moderate ~100 bps to 9%, driven by a shift in global supply chains, domestic demand and proximity to the Middle Easts petrochemical feedstock.

Company Overview

Kirloskar Pneumatic Company Limited (KPCL), established in 1958* by the late Shri Shantanurao Kirloskar, is a key part of the Kirloskar Group. The Company operates across a broad industrial spectrum, delivering engineered solutions for sectors including oil and gas, steel, cement, food and beverage, railways, defence and marine.

KPCLs operational framework includes advanced manufacturing units located in Hadapsar, Saswad and Nashik. These facilities enable the production of high-precision equipment such as screw, reciprocating and centrifugal compressors, along with gears and pinions. With one of the most modern machine shops in the country, the Company continues to adopt Industry 4.0 technologies including Industrial loT, digital tracking systems and automation to optimise throughput and quality.

As of FY 2025, KPCL have customers in over 30 international markets. The Company is actively expanding its reach in strategic regions including the Middle East, South East Asia, Indo-China and parts of Africa, targeting both products and turnkey projects to drive export growth.

Operational support is delivered by a nationwide network of service engineers, ensuring reliable performance across customer installations. In line with its strategic priorities, KPCL signed a Share Purchase and Share Holders Agreement to acquire a majority stake (55.26%) in Systems & Components (India) Private Limited, a move aimed at augmenting its technological and manufacturing capabilities. Additionally, an agreement with Universal MEP Projects and Engineering Services Limited (UMPESL) was executed to serve specialised demands of the textile sector.

The Company is structured into two reportable segments: Compression Products and Others (non-reportable). This segmentation supports its targeted approach to business development and market expansion.

Industry Structure and Developments, Segment Analysis, Risks and Concerns, Opportunities and Threats and Outlook

Compression Products

The strong domestic and international demand across multiple industrial sectors creates a favourable growth environment for all of the business verticals of the Company. The Companys reputation for developing a plethora of innovative products that are able to specifically cater to the needs of the Indian market is an add-on advantage for them.

Additionally, the steady advancements in its products ensure that they meet the highest quality and reliability standards. The shift in the global energy landscape, driven by environmental and political factors, acts as a driver for the Companys growth. These positive market trends in place, provides the Company a perfect platform to expand its activities and continue to develop a successful trajectory.

Air Compressor Business

The Company operates a diversified portfolio within its Compression Products segment, comprising air compressors, refrigeration compressors and gas compression systems. The air compressor segment, in particular, continues to be a key growth driver, supported by the Companys ability to deliver solutions across industrial applications including power tools, process automation, pneumatic systems and energy infrastructure.

The global air compressor market is projected to grow at a CAGR of 5.6%, with strong demand expected from Asia-Pacific and African regions. KPCL is well-positioned to benefit from this trend through its broad product range and enhanced inhouse manufacturing capabilities¹.

The Company offers three major compressor technologies— Screw, Reciprocating and Centrifugal—each tailored to specific industrial needs. The introduction of proprietary product lines such as Tezcatlipoca (centrifugal compressors), Aria- Atmos (screw compressors) and Jarilo (biogas compressors) has strengthened KPCLs value proposition. These launches support entry into newer applications and customer segments, particularly in energy transition-related projects.

Strategic initiatives-including indigenisation of key components such as screw rotors and centrifugal impellers, optimisation of production processes and reduced lead times- have improved cost efficiency and product performance. The exclusive sales agreement with Universal MEP Projects and Engineering Services Limited (a Voltas subsidiary) has opened additional distribution channels in the textile industry.

Additionally, the partnership with PDC Inc. (USA) has enabled the Company to address specialised applications such as hydrogen compression, expanding its scope in emerging energy solutions. The current order book reflects steady demand across both domestic and international markets, reinforcing the Companys competitiveness in a global landscape that includes several major multinational players.

The air compressor business ended the year on a strong note with record dispatches of the Tezcatlipoca centrifugal compressors. The sale of large reciprocating compressor packages to the fertilizer and chemical plants added to the sales growth. Overall order intake was strong, indicating a clear growth in market share. The air compressor business continues to be 20% of our overall sales.

Refrigeration Business

The global industrial refrigeration market was valued at approximately $20.9 billion in 2024 and is projected to reach around $32.25 billion by 2031, growing at a compound annual growth rate (CAGR) of 5.57% during the forecast period. Growth is being driven by increased demand for energy-efficient and environmentally compliant refrigeration systems, particularly in developing regions. The food and beverage sector in the Asia- Pacific region remains a key contributor to this demand².

The Company has maintained a strong position in this segment, supported by a proven track record in hydrocarbon- based refrigeration systems. These systems utilise a broad range of refrigerants, including propane, propylene, butane and blended hydrocarbons, enabling the Company to meet diverse customer and regulatory requirements.

The Company follows a comprehensive ‘concept to commissioning approach, allowing it to effectively address evolving environmental, quality and safety standards. It holds an estimated 60% market share in ammonia refrigeration compressors - a segment requiring specialised expertise and performance standards.

Further reinforcing its technical capabilities, the Company has made targeted investments in a dedicated in-house performance testing facility for refrigeration compressors. This infrastructure supports product validation and compliance with industry norms.

The Khione Refrigeration package has shown steady growth in sales and the Company anticipates further expansion in this segment. The recent acquisition of Systems & Components (India) Private Limited is expected to enhance product integration and market access, further strengthening the Companys presence in the refrigeration domain.

During the reporting year, the Refrigeration Compression Segment grew strongly on the back of cold chains and ice plants, dairy industry, food processing, pharma, chemicals and fertiliser industries. This more than compensated for the marginal decline in the growth of the gas business. Bringing of Systems & Components (India) Private Limited as subsidiary into our fold further enhanced our offering to the growing market.

Your Company offers Refrigeration Packages for various processes in Oil and Gas sector, fertilizer, petrochemicals. Your Company is a leading manufacturer of Air cooled, Ammonia refrigerant based reciprocating compressors used in Cold rooms, Ice plants, Food processing, diaries, pharma etc. Your Company have now launched the Khione screw to strengthen its position in this space and to meet the requirement of larger plants. In addition to the above, your Company makes Vapour Absorption Chillers that are used where process Steam or hot water is available, primarily for cooling upto 10?.

Process Gas Business

Process gas compressors are used in various sectors such as oil and gas, chemical and petrochemical. These are widely used in compressing gases such as natural gases, biogas, nitrogen, hydrogen and carbon dioxide, which is used in different types of industrial applications. Among the global region, the Asia-Pacific is expected to provide the momentum to this market because of the growing demand for natural gas in developing countries and the increase in chemical and petrochemical industries.

The business in this industry is recognised by the phrase ‘Proven Track Record (PTR) and with its robust design and engineering capabilities, this helps the Company to compete in the global market. The Company also has a remarkable market share in the oil and gas industry in India.

The process gas space continues to unlock new opportunities and challenges. While the sale of gas packages was slow and steady, the sale of CNG packages and Calana booster for gas distribution was in fits and spurts. We had periods of good order inflow, bad execution and vice versa. We continue to see a decline in commissioning of mother stations and a preference to put up daughter stations. This is clearly to comply with the coverage commitments that the gas companies have made and this is not a good sign for us. The booster compressor is a marginal business and we are reluctant to pick up more orders beyond the point. However, the new energy business both in hydrogen and biogas are growing, but it is yet to pick up significantly in terms of execution.

Sale of CNG packages to the MENA region is scaling up and this seems to be a new area of growth as countries in this area find it the quickest way to get energy to meet their growing economies. KPCL continues to operate and maintain near 1,000 odd filling stations across 15 states and the O&M business remains strong and growing.

Amongst the other products the Company also have several products for biogas. Your company have Jarilo range of compressors which can take biogas as it is generated from 0.5 bar and take it up to 250 bar to fill cascades or to fill into vehicles directly. Or we can even compress it and put it into pipelines or conveying to various places.

The Compression Segment contributes about 94% of the total revenue and is the only reportable segment.

Other Business

By offering gears to the Railways, the Companys Transmission Division demonstrates its expertise across a broad spectrum of gear and gearbox types, handling applications from submegawatt to higher megawatt power. Moreover, the Company also addresses demands in rail traction gears, marine gearboxes and the renewable energy sector (wind and hydro turbines). During the reporting year, KPCL achieved revenue over T 1,000 Million from the transmission business.

Outlook

The economic outlook continues to be uncertain, less so in India. The general slowdown across geographies does have a sobering impact on all new projects and investments. Yet in all this, we seem to be in a sweet spot with several things going in our favor. We have a slew of launches, mostly replacing imports. We have good products addressing the growing market segments like dairy, pharma, chemicals and more in-house manufacturing that is continuously being set up, reducing both our cost and shortening delivery. The strong engineering capabilities to build customised solutions for many applications and industries helps us to meet the growing customised requirements of various customers. A large value of active quotes and proposal out there, as well as the highest ever order book at the beginning of year, both help to meet our growing aspirations.

The various capital expenditure projects currently underway, along with those planned for FY 2025-26, are expected to support the Companys ongoing growth momentum. A key strength of the Company lies in its engineering capabilities, led by a team of approximately 200 engineers. This capability is being further enhanced through the integration of advanced technologies, including deep tech, artificial intelligence (AI) and robotics, across its operations.

These initiatives are designed to broaden the Companys product offerings, improve operational efficiency and support its medium-term objective of reaching a revenue milestone of T 2,000 Crore. Achieving this target is expected to further strengthen customer value delivery and position the Company for sustained growth.

Technological Overview

The Companys ability to develop highly customised products using in-house expertise significantly strengthens its design and development capabilities. The Company has implemented many cutting-edge technological solutions. Having a team of over 200 engineers in Design, Engineering and Research, the Company continues to develop new products and solutions for its customers.

During the year, the Company has received 23 IPs, filed 20 IPs, 4 papers presented in International Conference and had 2 international publications, as per the details below:

Particular	Filed in	Granted in
	FY2024-2025	FY2024-2025
Patents	8	2
Trademark	11	11
Design	1	10
Research Publications in International Forum	NA	2

Following are the list of launches in the last few years by the Company:

* Jarilo - A Bio - gas Compressor

* Tyche - A Semi-Hermetic Compressor

* Khione - A Gas Screw Compressor

* Tezcatlipoca - A Centrifugal Compressor

* Calana - A Booster Compressor

* Aria - A Air Compressor

* Viteza - A Refrigeration Reciprocating Compressor

Value Chain Advantages

The Companys comprehensive range of in-house capabilities delivers notable advantages across its value chain. This is demonstrated by its foundry, which produces cast iron, SG iron and aluminum alloys and its extensive fabrication plant, facilitating the creation of base frames, pressure vessels and a diverse array of other structure.

Internal Control and Adequacy:

The Company has an Internal Control System, which is proportionate to the size, scale and complexity of its operations. All the internal controls are designed in a way which are well aligned with the evolving business needs, objectives and overall strategic direction.

The Audit Committee and the Board decided the scope of the internal audit. To maintain its objectivity and independence, an external auditor has been appointed by the Board, who reports to the Audit Committee of the Board at regular intervals.

The efficiency and adequacy of internal control systems in the Company is monitored and evaluated by the auditors, who ensure its compliance with operating systems, accounting procedures and policies for various functions of the Company. Based on this report, process owners undertake corrective actions in their respective areas and thus, strengthen the controls further. The observations, along with the corrective measures are then periodically presented to the Audit Committee of the Board.

In FY 2025, Internal Financial Controls laid down by the Board were tested for adequacy and effectiveness and no reportable weakness was observed. The Company has effectively implemented policies and procedures, which ensure proper and efficient conduct of its business.

These further certify the safeguarding of assets, prevention and detection of frauds and errors, accuracy and completion of accounting records and prompt preparation of reliable financial information. Statutory auditors have also attested to the adequacy of internal financial control systems with reference to financial statements.

Operating Performance:

During the year under review, your Company achieved a sale of T 16,286.27 Million as compared to T 13,226.20 Million in the previous year, an approximate growth of 23%. The growth in sales was mainly driven by higher domestic sales and increase in export sales. Your Company produced over 3,500 compressors during the year and this was a new record. The profit before tax grew from T 1,778.75 Million to T 2,806.53 Million, a growth over 57%. All businesses, air, refrigeration and gas compressors and compression systems did very well thereby your Company had all round growth during the year.

The EBITDA in the current year is at 18.99% of total income compared to 16.53% in the previous year.

The Company has no loans, neither term loans nor working capital loans. It is a debt-free Company. Financial charges are paid to banks for services not related to any borrowings. The ratio of net working capital-to-sales improved to 14.40% from the previous years 19.90%, improvement is driven by higher customer advances and more favorable payment arrangement with suppliers. Receivables have marginal increase by 3 days from 86 days to 89 days primarily due to elevated Q4 sales and similarly, supplies outstanding have improved to 69 days from 86 days compared to the previous year attributed to improved payment terms with supplier. Your Company had a net cash position of about T 3,356 Million as on 31st March, 2025, after paying final dividend of the previous year and interim dividend declared in the reporting year apart from the capex.

During the year, there were no significant variations (i.e. change of 25% or more as compared to the immediately previous financial year) in the key financial ratios such as Debtors Turnover, Inventory Turnover, Current Ratio, Interest Coverage Ratio. The Operating Profit Margin was improved to 19% from 16.5% and the Net Profit Margin was also improved to 12.8% from 9.9% as compared to previous year mainly due to execution of large packages and enhancement of export sales in the reporting year. As on the Balance Sheet date, your Company does not have any debt. As such Debt Equity Ratio is zero and variance to previous period is not applicable. As on 31st March, 2025, the Companys return on net worth improved to 23% as compared to 17% in the previous financial year resulting from increase in profit for the year.

Reaffirmed AA- credit rating by CRISIL with positive outlook. Dividend at the rate of 500% for the financial year ended on 31st March, 2025, which is the highest in any financial year. Your Company also completed one acquisition successfully during the reporting year and as a commitment to Environmental, Social and Governance (“ESG”), all our three factories have started using the solar energy to the extent of 30% of the total consumption.

Risk and Concern

Recognising the critical role of a strong risk management framework, the Company proactively addresses potential risks in a systematic manner. Understanding its exposure to various economic, legal, sectoral, ESG, human resource and operational factors inherent in its business, the Company employs a comprehensive risk management process. This process ensures ongoing awareness of risks related to product supply and project execution. Divisional risk management provides input to create a company-wide risk management matrix. A dedicated Risk Management Committee analyses the potential risks and formulates mitigation strategies.

For an elaborate risk management approach, refer to page numbers 44 and 45.

Safety, Health and Environment:

The Company prioritises safety, health and environmental sustainability through a range of initiatives. Regular safety audits and monthly monitoring ensure adherence to safe working practices, supported by a comprehensive safety organisation. Periodic health checks and counselling sessions and wellbeing programmes promote employee well-being, whereas virtual and physical awareness sessions foster a culture of healthy living and safe working conditions in the organisation. Flexible working hours and additional off days contribute to a healthy work-life balance. The strict PPE policies, work permit systems and regular safety training ensure the safety of all employees. The Companys commitment to emergency preparedness is evident through organisational-level response plans and regular drills. Additionally, employee training on Company values, code of conduct and human rights awareness underscores the Companys dedication to a safe, healthy and ethical work environment. The Company is one of the select Integrated Management System (IMS) certified entities, holding accreditation in ISO 9001, ISO 14001 and ISO 45001 standards. During the year, an external agency has conducted IMS recertification audit of your Company and recertified with the IMS certificate. Your Company is committed to comply with all statutory and regulatory requirements. Your Company has been making efforts in building awareness among employees, suppliers and service providers.

Your Company has given a lot of attention to improving greenery all around its manufacturing plants. Energy conservation initiatives, safety initiatives and quality initiatives are being taken on a regular basis to ensure sustainability.

Corporate Social Responsibility

Inspired by our founder Late Shri S L Kirloskar all our CSR initiatives are focused in the areas of Education, Environment and Health. CSR initiatives in your Company are planned, budgeted, implemented and reviewed regularly.

The Company has contributed an amount of T 18 Million by way of contribution to Kirloskar Institute of Management for promoting higher management education.

Socio-economically challenged students from 7th and 8th Std. from 5 schools in the vicinity of Saswad Plant are supported for development through Bharari Initiative. The initiative that benefits 360 students was enhanced by adding scientific psychological assessments, counselling and guidance to students, teachers and parents in addition to life skills related activities throughout the year.

Your Company is supporting education of girls, by supporting daughters of workmen of Cold Storage Units from Uttar Pradesh, Uttarakhand, Punjab, Gujarat, Rajasthan and Madhya Pradesh. This unique CSR Initiative, named KaShi (Kanya Shiksha), is implemented by employee volunteers from Regional Offices of the Company in North and West in collaboration with respective State Cold Storage Associations. At present, 40 girl students were benefitted from this initiative.

To create awareness about mental health, relationships and issues related to adolescence, your Companys School Health Initiative, Releshani reached out to 1,400+ 9th, 10th and 11th Std. students from 14 schools and junior colleges through 28 workshops each of 1 to 3 day duration during this year.

Your Company is supporting 5 batches of 3-year residential diploma programmes in Mechatronics and Smart Factory,

Electronics and Embedded Systems and Electrical and Electronics comprising of 155 socio-economically challenged students at NTTF facilities at Bengaluru, Dharwad and Pune. The selection criteria have ensured that deserving and needy candidates are selected. Coming from 10+ states across the country, 43% of these students are girls, 8% are orphans and 6% are having only mother as a single parent, demonstrating focus on gender diversity, inclusion and equity as a guiding principle for the initiative.

By facilitating water filtration and purification plants in last 3 years, the Company has played an important role in making clean and safe drinking water accessible to 37,000+ students from 31 school locations in the nearby vicinity of its factories and in the Ramnadi river basin.

Your Company is supporting various activities in 16 schools associated with Ramnadi Restoration Mission through its RRM School Initiative in addition to participating in an online Ramnadi Festival and other Kirloskar Vasundhara Initiative related activities. This year river restoration message reached out to 22,500+ students and teachers by way of wall paintings and competitions like essays, drawings etc. The Millets Festival characterised by awareness workshops, wall paintings and millets recipes competition lead to spreading awareness amongst 25,000+ and 3,750 students, parents and teachers from 5 schools in Hadapsar, Pune and 5 schools in Saswad, Pune respectively.

People Processes and Systems:

KPCL has been recognised with the “Prize for Distinction in HR Excellence” in the 15th CII National HR Excellence Assessment - 2024 for its human centric approach and strong people processes. This has resulted as recognition for a robust capability development, employee engagement, communication, rewarding culture in the organisation. This year the priorities of the organisation were building collaboration and succession planning of critical roles in the organisation. We started the year by defining very clear goals and priorities for each vertical in the HR function. During the year we imparted 5400+ training man-days covering more than 90% of our workforce through 140+ learning initiatives. Learning and Development programmes supporting the strategic objectives were designed and implemented during the year. This included Senior Leadership Development Programme, High Potential employees assessment and development, Product knowledge training series, focused learning interventions at regional offices, campus to corporate for budding engineers, Future leaders grooming, contract management, Finance for Non-Finance, team building, Leadership and Managerial Effectiveness, Project Management etc. There were strategic structural changes made during the year to synergise the operations and business teams across the Organisation. 3700+ rewards were given during the year through various reward schemes. Your Company has ensured 100% legal compliance to all applicable labour and factory statutory requirements. Your Company has also signed long term wage settlement agreement for 3.5 years ensuring cordial Industrial relations all the time and has zero man hour loss during the fiscal year.

The IMS audits and certification were done and the Company continued to invest on its participative culture through Leadership address, HR Regional connect, Project Foresight, Reward and Recognition Sessions, Sudnyan Knowledge sharing, 5S, Kaizen and CFTs etc. We participated in National Competition and won several awards.

Values:

The values of KPCL guide the Company towards success. The simple yet effective reminder helps the employees to grow towards their respective goals while having a rooted presence in the six fundamental values.

Human Resource and Industrial Relations:

KPCL prioritises equal opportunity in recruitment, aligning manpower needs with business goals and culture. Various channels such as job portals, referrals and campus recruitment are utilised for hiring the latest talent in the market. Employee training needs are identified annually by the Company, with tailored programmes to upskill the workforce. The Company also possesses Leadership development programmes which are emphasised across all levels through structured programmes like “ARCHON” - Senior Leadership Development Programme, First Time Managers Development Programmes, Frontline Manager Development and Future Leader Programmes.

The Company nurtures and creates employee engagements through a structured reward and recognition framework, linked to individual and team performances. Grievance reporting mechanisms and safety measures, including health checks and flexible working hours, are core to employee well-being, which are dutifully done by the Company. Overall, KPCL fosters a proactive and supportive culture for its employees.

An elaborate Human resource and industrial relations is as below:

The Human Resources (HR) department at KPCL is driven by the mission ‘To be an employer of choice. We look at the employees entire work life cycle, to ensure timely interventions that help build a long-lasting and fruitful career.

Recruitment and Staffing: With the growth of business, we

continued to focus on having the most befitting managers with the most relevant job-experience to fill in the vacancies. As such, we do have a robust recruitment and Human Resources Management Process. Changes are made in the process based on employee feedback. Selection of new employees is done through a rigorous process to ensure the right candidate is selected. With the projected growth of the business, more number of engineers is getting trained to manage higher level of operational efficiencies.

The annualised attrition rate for FY 2025 stands at 9.9%, which is significantly better in comparison to the similar industries. We continue to work on simplifying internal processes.

HR process owners collaborate with various teams in the Organisation to ensure that employees are able to work at their productive best.

Career Planning: Aspiring managers do need a career path to contribute better. Accordingly, the Critical Role Holders are identified as part of the succession process. A group of identified high-potential employees went through a customised aptitude and behavioural assessment followed by individual development plans and their development journey for further growth in the organisation is planned during the coming time.

Learning and Development: L&D initiatives are at the foundation of KPCL. Competency Development continues to be a key area of strategic focus for us. During fiscal 2025, the total training provided for employees was at average 5.3 days per employee which has improved by 30% compared to previous year. This year more than 90% of our employees have undergone at least one training programme during the year. Some of our employees are internal trainers and shared their domain knowledge in the Company. Such an intervention not only fosters a culture of mutual learning, but also encourages others to be a part of the larger community of internal-trainers at KPCL. We introduced Online Learning Management System (“LMS”) in 2021, thereby enabling and promoting a culture of self-learning and development in the Organisation. Last year, we have focused on imparting training through our LMS and significant number of mandatory programmes was through the KORE - Online Learning Management system. The Company is investing in our people in a big way as we make this journey together.

The Company undertook the Future leaders programme to develop and groom leaders who are truly “Limitless” who will lead from the front and take the organisation to new heights, as a part of succession planning.

Rewards and Recognition: It is understood that employee- motivation is key to many success stories. Acknowledging ones value-addition and recognising them play an important key role. Recognition schemes are monetary as well as non-monetary. Achievers are recognised every quarter for outstanding achievements as Star of the Month, Spontaneous and Team Rewards by Senior Management. As always, we have continued to focus on the much needed performance differentiation to ensure that our high-potential (HiPo), high- performing employees are driven towards higher purpose and goals. They are being groomed as our Talent-Pipeline to succeed to key roles in future. This year we also hosted a grand Annual Reward and Recognition ceremony extending a platform for all our employees to showcase their achievements and remarkable improvement projects.

Apart from the above, we do measure our performance, with intent to raise the bar of better performance; also to scale up the deliverables from HR team.

In addition to the above, we have mechanisms in place to foster a positive workplace environment, free from harassment of any nature. We have institutionalised the Prevention of Sexual Harassment Initiative (PoSH) framework, through which we address complaints of sexual harassment at the workplace. Our policy assures discretion and guarantees nonretaliation to complainants. The Kirloskar group companies have now adopted a common whistle blower policy and an ethics hotline has been created to provide an assuring platform to the employees to highlight discriminatory or violating acts or behaviors.

Communication: An attempt to encourage company-wide employee-communication is one of our pursuits. Dialogue is maintained with employees throughout the year through quarterly performance sessions, in-house magazine (Impeller) and intranet (Shashwat). The employees are aware of various developments in the Company. We have also done focused internal and external communication through interactive campaigns such as revamped House Magazine, revamped HR space on our intranet - Shashwat, New Wall and Table calendars, Quarterly Leadership address and Reward and

Recognition sessions. The revamped Marcom approach has resulted into significant rise in the social media followers of your Company. On an average we have 6 social media posts each month and 300+ internal communications regarding various highlights about your Company.

Cautionary Statement:

This Report contains statements relating to future business developments and economic performance that could constitute ‘forward looking statements. While these forward looking statements represent the Companys judgements and future expectations, a number of factors could cause actual developments and results to differ materially from expectations. The Company undertakes no obligation to publicly revise any forward looking statements to reflect future events or circumstances. Further, investors are requested to exercise their own judgement in assessing various risks associated with the Company and also the effectiveness of the measures being taken by the Company in tackling them, as those enumerated in this Report are only as perceived by the Management.