annual report 2008-09

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Painting the future GREEN. KIRLOSKAR BROTHERS LIMITED th 89 A n n u a l R e p o r t 2 0 0 8 - 0 9

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Page 1: Annual Report 2008-09

P a i n t i n g t h e f u t u r e G R E E N .

KIRLOSKAR BROTHERS LIMITEDt h8 9 A n n u a l R e p o r t 2 0 0 8 - 0 9

Page 2: Annual Report 2008-09

Developing eco-friendly products

Star Attraction

Unique, energy efficient, 7.5 HP monobloc surface water pump with a

'Five Star' rating by BEE, it lifts 16 liters of water per second. This is four

liters more compared to any other pump of similar HP. It consumes 7.6

amperes of electricity as against 12 amperes consumed by other makes.

The Bureau of Energy Efficiency (BEE) and Ministry of Power plan to

launch a scheme to replace all old and energy intensive pumps on farms

with this KBL pump all over India free of charge.

ince its inception over a century ago, the Kirloskar Group has contributed

significantly to the Green revolution in India and has been a harbinger of

prosperity to millions.

The colour Green is synonymous with growth and prosperity and symbolises

balance, harmony and renewal. At Kirloskar, we imbibe the spirit of Green, and strive

endlessly with single-minded zeal to spread the colour of prosperity and growth in

India and across the world.

Even in these trying times, your Company has excelled by continuous innovation,

proactive planning and strategic measures.

By setting new engineering benchmarks and redefining paradigms, we are all set to

paint the future GREEN. And ready to harvest the global opportunities that the future

holds.

S

Achievements in Green

Page 3: Annual Report 2008-09

Board of DirectorsSanjay Kirloskar Chairman & Managing DirectorGautam Kulkarni Vice ChairmanVikram Kirloskar Executive DirectorM. S. KirloskarS. S. Marathe (Upto 28.09.2008)S. N. InamdarM. G. Padhye (Upto 16.12.2008)Rahul KirloskarU. V. RaoR. K. Srivastava Whole Time DirectorP. S. JawadekarJ. R. Sapre Whole Time DirectorA. N. Alawani Lalita D. Gupte Pratap B. Shirke

Company SecretaryG. P. Kulkarni

AuditorsM/s. P. G. Bhagwat, Chartered Accountants

BankersBank of IndiaCanara BankHDFC Bank LimitedICICI Bank LimitedCitiBank N.A.

Registered OfficeUdyog Bhavan, Tilak Road, Pune 411 002Phone : (020) 24440770 Fax : (020) 24402083Email : [email protected] Website : www.kbl.co.in Group Website : www.kirloskar.com

New Corporate office "YAMUNA", Survey No. 98 (3-7), Baner,Pune - 411 045, Maharashtra (India)Phone : (020) 27214598 Fax : (020) 27211136Email : [email protected] Website : www.kbl.co.in Group Website : www.kirloskar.com

Works Kirloskarvadi, Dewas, Shirval, Kondhapuri

Information for Shareholders

Annual General Meeting

Day & Date : Friday, July 17, 2009Time : 11.00 a. m.Venue : "YAMUNA", Survey No.98 (3-7)

Baner, Pune - 411 045

Dates of Book : July 4, 2009 to July 17, 2009 Closure (both days inclusive)

Contents Page No.

Decade at a Glance 2Directors' Report 3Management Discussion & Analysis 10Report on Corporate Governance 35Auditors' Report 49Balance Sheet 52Profit & Loss Account 53Cash Flow Statement 54Schedules to the Accounts 55Statement relating to Subsidiary Companies 86Consolidated Financial Statements 88

KIRLOSKAR BROTHERS LIMITEDth

1

Page 4: Annual Report 2008-09

DECADE AT A GLANCE

(Rupees in Millions)

Notes :

Previous years' figures have been regrouped to make them comparable.

* Dividend Recommended 100%

Figures of Earning per Share and Book Value per Share are calculated for all the reported years above after considering the subdivision of equity share of Rs. 10/- each to share of Rs. 2/- each.

Particulars 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Net Sales 3713 4162 3746 4757 5078 7309 9246 13,400 15,251 18,309

Other Income 79 295 82 72 225 132 750 2,408 430 359

Material Cost 2162 2557 2279 3126 3393 4859 6093 9,290 11,126 13,927

Other Expenses 1270 1493 1209 1371 1405 1896 1965 2,563 2,704 3,249

Interest 120 141 106 75 65 48 55 84 169 303

Depreciation 72 78 83 85 107 100 97 121 182 207

Profit before tax 168 188 151 172 333 538 1786 3750 1,500 982

Income tax provision 43 48 28 52 68 31 63 385 399 312

Net Profit after tax 125 140 123 120 265 507 1723 3365 1,101 670

Share Capital 71 71 71 71 71 71 212 212 212 212

Reserves 1215 1321 1352 1459 1565 1832 2932 5808 6,409 6,879

Net Worth 1286 1392 1423 1530 1636 1903 3144 6020 6,621 7,091

Imports 51 54 49 119 144 261 606 987 1,152 2,084

Exports 456 586 585 585 572 1005 685 2266 1,483 2,240

Basic Earnings per Share (Rs.) (Face Value of Rs. 2/-) 3.54 3.98 3.48 3.41 7.51 14.17 15.42 31.82 10.41 6.34

Basic Earnings per Share (Rs.)(Face Value of Rs. 2/-) (Excluding Extraordinary Income/Expense) 3.54 3.15 3.48 3.41 7.51 14.17 10.70 14.76 10.41 6.34

Dividend % 45.00 45.00 45.00 45.00 200.00 300.00 200.00 200.00 200.00 *100.00

Book Value per Share (Rs.) 36.48 39.47 40.37 43.40 46.40 53.97 29.69 56.92 62.60 67.05

Debt Equity Ratio 0.54 0.53 0.41 0.24 0.29 0.18 0.06 0.08 0.09 0.03

2

Page 5: Annual Report 2008-09

KIRLOSKAR BROTHERS LIMITED

DIRECTORS' REPORT TO THE MEMBERS thYour Directors present the 89 Annual Report and the Audited Annual Accounts

of the Company for the year ended March 31, 2009.

FINANCIAL RESULTS

The financial results of the Company for the year 2008-09 as compared with the previous year are as under: -

Current PreviousYear ended Year endedMarch 31, March 31,

2009 2008(Rs.) (Rs.)

Sales 18,309,447,980 15,251,461,446Other income 359,135,347 429,536,631Total 18,668,583,327 15,680,998,077

Profit before tax 982,203,176 1,500,406,123Provision for tax 311,916,578 399,039,651Profit after tax 670,286,598 1,101,366,472Surplus in Profit & Loss Account brought forward from previous year 506,879,134 600,468,691Available surplus 1,177,165,732 1,701,835,163

APPROPRIATIONSYour Directors propose to appropriate the available surplus as under :-Dividend @ 100% (200%) on 105,764,355 equity shares of Rs. 2/- each 211,528,710 423,057,420Additional tax on Dividend 35,949,305 71,898,609Transferred to General Reserve 400,000,000 700,000,000Balance carried to Balance Sheet 529,687,717 506,879,134TOTAL 1,177,165,732 1,701,835,163

Profitability continues to be under pressure due to various factors. During the current year, as with other industries, there was an impact on the manufacturing sector due to global economic situations. There have been instances of delay in project execution and non fulfilment of commitments due to financial crisis faced by small vendors.

The Company is addressing the issue of cost reductions, inventory control and faster realization of debtors. During the year the Company has restructured its business into various sectors to address each market segments. This sectoral approach which was introduced in the current year is showing encouraging results for exploring different market segments.

DIVIDEND

Directors recommend a dividend of 100% (Rs. 2/- per equity share) for the year.

SCHEME OF ARRANGEMENT

It is proposed to transfer certain non-core investments to a separate Company to be formed for this purpose through Scheme of Arrangement. A Company "Kirloskar Brothers Investments Limited" has been formed and the details of the scheme would be separately sent to the shareholders after directions of the High Court.

STATUTORY DISCLOSURES

1. ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE Details of energy conservation, technology absorption, research and development and foreign exchange earnings as required under Section 217 (1) (e) of the Companies Act, 1956, are given in the Annexure - I to this Report.

2. PARTICULARS OF EMPLOYEES Information regarding employees in accordance with Section 217 (2A) of the Companies Act, 1956 is given in the Annexure - II to this Report.

18,000

16,000

14,000

12,000

10,000

8,000

6,000

4,000

Rs

. M

Net Sales

Year

2005 2006 2007 2008 2009

Net Worth

7,000

6,000

5,000

4,000

3,000

2,000

1,000

Rs

. M

Year

2005 2006 2007 2008 2009

2,500

2,000

1,500

1,000

500

-

Year

Rs

. M

Import & Export

Import Export

2005 2006 2007 2008 2009

Earning per Share

35.00

30.00

25.00

20.00

15.00

10.00

5.00

-2005 2006 2007 2008 2009

Year

Rs

.

th

3

Page 6: Annual Report 2008-09

3. SUBSIDIARY COMPANIESDuring the year, the Company has become a Subsidiary Company of Better Value Holdings Private Limited, one of the promoters and a Kirloskar group Company.

On February 2, 2009, the Company made an application to the Central Government under section 212(8) of the Companies Act, 1956 for exemption from attaching the annual accounts of the subsidiary companies. However, since the approval is still pending with the Government, we provide separately the respective annual accounts and other documents of subsidiary companies.

During the year, the Company has acquired majority shares of The Kolhapur Steel Limited (TKSL), a Company engaged in the business of manufacturing of alloy steel castings, catering to sugar, cement, steel, pumps, valves, marine and other general engineering industrial sectors. TKSL which was a sick company registered under the Board for Industrial and Financial Reconstruction (BIFR), has become subsidiary company during the year. The captive demands of the Company for quality steel castings would be catered by TKSL. TKSL has reported profit for the year ended March 31, 2009 and the financials of the subsidiary are provided separately with this annual report.

The subsidiary company Kirloskar Silk Industries Limited, has approached the Government authorities seeking their approval for change of purpose of the land allotted for a specific purpose. The application is pending with the Government authorities.

As contemplated earlier, the Joint Venture Company namely Kirloskar Brothers LLC was not formed at Oman as the project at Sohar in Oman has been executed.

4. DIRECTORS' RESPONSIBILITY STATEMENTPursuant to Section 217 (2AA) of the Companies Act, 1956, the Board of Directors report that

lIn the preparation of the annual accounts, the applicable accounting standards have been followed and there was no material departure from the accounting standards.

lAccounting policies have been selected and applied consistently and that the judgements and estimates made are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company as at March 31, 2009 and of the profit of the Company for the period April 1, 2008 to March 31, 2009.

lProper and sufficient care has been taken for the maintenance of adequate accounting records, in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities, and

lThe annual accounts have been prepared on a going concern basis.

5. CASH FLOWA cash flow statement for the year ended March 31, 2009 is attached to the Balance Sheet.

SAFETY, HEALTH AND ENVIRONMENTThe prestigious international certification OHSAS 18001 has been awarded to Kirloskarvadi plant of the Company for ensuring and achieving occupational health and safety standards of the persons connected with Kirloskarvadi plant. Our Dewas and Shirval plants have already been certified, while the Kondhapuri plant will be applying for certification in the current year.

CORPORATE GOVERNANCEPursuant to Clause 49 of the Listing Agreements with the Stock Exchanges, Management Discussion and Analysis Report, Report on Corporate Governance, Auditors Certificate on Corporate Governance and the declaration by the Chairman and Managing Director regarding affirmations for compliance with the Company's Code of Conduct are annexed to this report.

EMPLOYEE STOCK OPTION SCHEME (ESOS)During the year 2007-08, Company launched the Employees' "Share a Vision" Stock Option Scheme, 2007 (ESOS - 2007). During the year, first tranch of options got vested. The exercise price offered is at Rs. 200/- per option to be converted into an equity share on exercise.

The Management has formulated under ESOS - 2007, a proposal of providing stock options at Rs. 2/- per option to award employee for their outstanding, exemplary performance in getting sustainable results.

The guidelines for issue of Stock Options at Rs. 2/- each under ESOS-2007 to reward exemplary performances of the employees of the Company have been circulated.

The disclosures required to be made under the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and a certificate from the Statutory Auditors with regards to compliance of the guidelines, is provided as Annexure - III to this report.

4

Page 7: Annual Report 2008-09

FIXED DEPOSITS The Company is neither accepting nor renewing the matured deposits since January, 2003. As on March 31, 2009, deposits from public and shareholders aggregating to Rs. 913,000/- have matured but have not been claimed. The Company has sent reminders for the same.

CORPORATE SOCIAL RESPONSIBILITY The Company has a defined policy on Corporate Social Responsibility. The main thrust is on social health and education. However, company also undertakes various other activities for economic development of the society. At Kirloskarvadi plant, various facilities are provided for the benefit of the entire society. Various health camps have been organised - free health check-up, fitness programs, blood donation camps are conducted by the Company. Company also organized Disaster Management program for enhancing the level of awareness, where more than forty local representatives attended the program. In the field of education, Kirloskar Brothers Limited (KBL) gives donation to local schools and colleges. The Company has also sponsored a turbo machinery course for students of a local engineering college. Our Dewas unit has joined hands with Municipal Corporation for propagating rain water harvesting. The Company has also sponsored various training and education oriented programs to the social workers and Non Governmental Organisations.

The Company also continues to support a few Organisations’ activities in the field of education in rural areas and such other social causes.

CENTENARY CELEBRATION Kirloskarvadi manufacturing plant has entered its centenary year. During 1910 our founder, Shri Laxmanrao Kirloskar first came to Kirloskarvadi to establish the factory and township. The Company has planned certain events to celebrate the centenary year.

A NEW CORPORATE OFFICE During last few years, the operational activities of the Company have increased tremendously. The Company has been operating from various locations in the city. A need was therefore felt to operate from a single office and the Company has built a new corporate office. The new building, named “Yamuna”, is prominently located at Baner on Mumbai-Bangalore highway. It has an area admeasuring 12000 square meters and has many unique features of a “Green” building. The Company will soon apply for obtaining a LEED (Leadership in Energy and Environmental Design) rating for this site.

DIRECTORS With a deep regret, we report the sad demise of Mr. Sharatchandra S. Marathe, Member of the Board of Directors of the Company since 1985. Mr. Marathe had wide experience in the fields of economics and industry. He was on the Boards of many other corporates and also on various prestigious committees formed by the Government. His knowledge and guidance was of a great help to the Company.

Mr. Madhav G. Padhye resigned from the Board with effect from December 16, 2008 due to health problems. Mr. Padhye was associated with the Company for the last 19 years. He has wide experience in the Civil Engineering, Government service and Water Resource Development Projects. His expertise and guidance to the Board and the Company has been noteworthy.

The Board wishes to place on record their gratitude for the guidance received from Mr. Marathe and Mr. Padhye during their tenures as Directors of the Company.

Mr. Gautam Kulkarni, Mr. A. N. Alawani and Mr. S. N. Inamdar, retire by rotation at the ensuing Annual General Meeting and being eligible offer themselves for re-appointment.

AUDITORS M/s. P. G. Bhagwat, the Auditors retire at the ensuing Annual General Meeting and are eligible for re-appointment. The requisite certificate pursuant to section 224 of the Companies Act, 1956 has been received. The Audit and Finance Committee has recommended their re-appointment and the annual audit fees.

ACKNOWLEDGEMENTS Your Directors wish to place on record their appreciation of the unstinted support and co-operation given by banks and financial institutions. Your Directors would further like to record their appreciation of the efforts of every employee for the results achieved during the difficult economic conditions faced this year.

For and on behalf of the Board of Directors,

SANJAY KIRLOSKAR CHAIRMAN

Pune : June 2, 2009

KIRLOSKAR BROTHERS LIMITEDth

5

Page 8: Annual Report 2008-09

ANNEXURE – I TO THE DIRECTORS' REPORT

A. Conservation of Energy

The Company continues to take additional steps for Conservation of Energy. During the year, Company has undertaken adoption of divided blast cupola to improve coke to metal ratio, installation of hanger type shot blasting to reduce power consumption, installation of turbo ventilators in the entire factory including stores and security offices, adoption of energy efficient motors, de-rating of motors, energy saver for CNC turning lathes to reduce power cost.

Additional measures taken include replacement of power transformer by energy efficient transformer and VCB for transformers on/off to reduce transmission loss, Bio gas plant for guest house to reduce LPG consumption, PID controller for heat treatment furnace to reduce power consumption, Energy management - staggering of melting zone for foundry which reduced demand by 800 KVA, Optimization of illumination to reduce connect load of 40kw

B. Technology Absorption

1. Research and Development (R&D)

a. Specific area in which R & D carried out by the Company

- Double volute pumps in end suction series of pumps designed to operate at 2900 rpm.

- Horizontal split case pump 2 stage for desalination application.

- Horizontal split case pump with split mechanical seal.

- New product development for high head and high discharge application.

- Development of BHA600 pumps for Suriname project, BHA series enhancement to meet global requirement.

- Indigenous development of metallic volute pump

- Weight reduction of components for VT pumps and valves

- Development of AWWA series of Air Valves

- Development of 3000 mm, 1700 mm and Ebonite lined butterfly valves.

b. Benefits

- Global reference for Large Vertical Pumps

- Reduction in product lead time

- Competitive edge through product positioning

- Application coverage

- Improved quality of the product

- Competitive product cost

c. Future plan of action

- Development of high pressure metallic volute pumps with guide vane arrangement

- Development of BHA pumps for series enhancement

- Development of Large flow VT pumps for various power plants

- In-house development of 200 Ton capacity thrust bearing for high capacity concrete volute pumps

- Design and Development of double seal butterfly valves

- Design and Development of dual plate check valves

- Development of pumps for Marine and Defense application

- Development of High pressure, high temperature pump for Nuclear Thermal test facility

- Water mist system for sub marine simulation

d. Expenditure on R & D (Including new product development)

a. Capital Rs. 56,707,375/-

b. Recurring Rs. 204,156,669/-

c. Total Rs. 260,864,044/-

d. Total R & D Expenditure as a Percentage of total turnover 1.42 %

6

Page 9: Annual Report 2008-09

2. Technology absorption, adaptation and innovation

a. Efforts, in brief, made towards technology absorption, adaptation and Innovation

- Electronic control of pumping of operation is successfully developed. Also the remote monitoring through internet connection is developed.

- Development of Ni Al bronze castings with radiography quality.

- Development UP extended range of split case pump with thrubore design.

- Development of Valves Internal Pictorial Display System and Application for the patent.

- Development of new impeller locking arrangement for easy assembly and weight reduction.

b. Benefits derived as a result of the above efforts

- Due to development of UP extended range, there is substantial reduction in thru put time and cost reduction.

- Import substitution

- Technology Up-gradation

c. Technology imported during the last 5 years

Technology Imported

Metallic volute pumps, Ebara Corporation, Japan

Axial Flow Pumps from SIHI, Germany

3D modeling & Structural Analysis of Components -Softwares

Condensate Extract ion pumps from SIHI, Germany

- CV and MV Pumps - Deep well Pumps

Year ofImport

2004

2004

2005

2005

2008

Has technology been fully absorbed?

Yes

Yes

Yes - to extent of Modeling &

Structural Analysis

Yes

Yes

If not fully absorbed, areas where this has not taken place, reasons therefor and future plan of action

Not applicable

Not applicable

Not applicable

Not applicable

Not applicable

C. Foreign Exchange Earnings and Outgo

Exports Activities :

The company has export order bookings of Rs. 2300 million and sales of Rs. 2310 million, showing growth of 56% over the last year.

The company has orders from various countries viz. Vietnam, Greece, Spain, Italy, Sudan, Egypt, Sohar, Kazakhstan, etc. for irrigation / power / water supply projects.

The company's thrust on Africa and Latin America will continue for intense distribution and project business. Further, the continuous efforts are made to establish Kirloskar brand in Europe.

The Company is constantly exploring new export markets for its products and also striving to increase the range of products in existing markets and to expand our market share to exports in Southern and Central America.

Foreign exchange earnings and outgo:

Earnings Rs. 2,480,965,346/-

Outgo Rs. 2,084,419,438/-

KIRLOSKAR BROTHERS LIMITEDth

7

Page 10: Annual Report 2008-09

ANNEXURE – II TO THE DIRECTORS' REPORT

Information under Section 217(2A) read with Companies (Particulars of employees) Rules, 1975 and forming part of the Directors' Report for the year ended March 31, 2009.

Name & (Age)

Sanjay Kirloskar(52)

Vikram Kirloskar(50)

R. K. Srivastava(62)

J. R. Sapre (64)

Anant R. Sathe(56)

Sanjeev Shripad Date(59)

Dr. J. T. Kshirsagar (54)

Y. S. Rana (58) Avinash W. Purandare(49)

G. M. Maheshwari (59)

M. R. Pattewar (46)

Pradeep G. Chapalgaonkar(48)

D. B. Nimbalkar (56)

L.H. Dabi (57)

Vijay Mattoo (49)*

Ravindra Murthy (55)*

Narendra D. Wagh (54)*

Qualifications

Bachelor of Science (M.E), IllinoisInst. of Tech. USA

Bachelor of Science (Mech.)MIT, USA

M. Tech (I.I.T. Bombay)

Bachelor of Science

CA, LLB

B.E.(Mech)DIIT(Industrial Design)

PHD (Engg.), ME (Mechanical)

M. Tech. (Design Engg.)

BE (Electrical)

BE (Electrical)

B.E. (Mech), DIBM, DBM, MDBA (Mktg)

B.E. (Chem Engg), Dip in Mktg.

B.Com, MSW

B.E. (Mech)

BE (Electrical)

B.S. (Mech Eng)

B.E. (Production Engineering)

Designation/ Nature of duties

Managing Director

Executive Director

Whole Time Director

Whole Time Director

Vice President - Corporate Finance & Accounts

Vice President(Technical) - R & D and Quality

Vice President & Head of Corporate Research & Engineering Development

Vice President -Power

Vice President- Corporate Global Marketing

Vice President - Domestic & Agricultural Pumps

Vice President - Irrigation

Vice President - Industry

Vice President - Corp. HRM & C

Vice President - Corp. International Instit

Vice President & Head of Strategic Business Group - Projects and Engineered Pumps

Vice President - Distribution

Vice President - Industrial Pumps

Date of commencement of employment & (Experience)

02/05/1983 (31)

06/06/2001(27)

15/05/1989 (37)

01/04/2002 (43)

01/11/2003(33)

20/07/1970(39)

08.10.1996 (30)

17.02.1997 (30)

01/03/2005(27)

24.02.2004 (37)

27.08.1992(24)

01.04.2004(25)

01.01.2005(38)

15.11.1975(34)

02.05.2006 (25)

22.05.2008(32)

28.08.2008(31)

Gross Remuneration Rs.

17685755

19190148

8942863

8748187

3323255

2836172

3195841

3078376

2839467

3082206

2743219

2826236

2614931

2683083

1476212

2264465

1610540

Last employment

Manager, Kirloskar Cummins Ltd., Pune

-

General Manager (Tech), Worthington Pump India Ltd.,Kolkata

Vice President - (MED) Marketing, Kirloskar Oil Engines Ltd., Pune

Sr. Vice President - Finance, Kirloskar Pneumatic Company Ltd., Pune

-

I.I.Sc, Bangalore

Sr. Marketing Manager, Jyoti Ltd.

Consulting Practice Head (SCM), SAP India (P) Ltd., Bangalore

General Manager, Crompton Greaves Ltd.

Executive Officer, KSB Pumps, Pune

CEO,Master Handlers Pvt. Ltd.

Vice President, Traspek Silox, Baroda

-

Mather & Platt Pumps Ltd.

VP & SBU Head, Kirloskar Oil Enginees Ltd.

Head - Corp. Mfg. Services, Suzlon Energy Ltd.

*Employed for the part of the year

NOTES :1. Designation denotes the nature of duties also.2. Other terms and conditions are as per the service rules and conditions of the Company.3. The nature of the employment of all the above employees is contractual.4. Gross Remuneration comprises of salary, commission, allowance, medical, other perquisites and companies

contribution to PF and Superannuation funds.5. None of the above employee is a relative of a director of the Company, except Mr. Sanjay Kirloskar, who is a brother of

Mr. Rahul Kirloskar.6. None of the employees holds 2% or more of the paid-up equity share capital of the company.

8

Page 11: Annual Report 2008-09

ANNEXURE – III TO THE DIRECTORS' REPORT

Disclosures under the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 –

Particulars Employees' “Share a Vision” Stock Option Scheme, 2007

a. Number of Options granted 552,250 optionsb. Pricing Formula Rs. 200c. Number of Options vested 142,405 Optionsd. Number of Options exercised Nile. Total number of shares arising out of exercise of Options Nilf. Number of Options lapsed 81,535 optionsg. Variation in the terms of the Options No variationsh. Money realized by exercise of Options Nili. Total number of Options in force 470,715 optionsj. Employee wise details of options granted to -

i. Senior Management Personnel Noneii. Any other employee who receives a grant in any None

one year of option amounting to 5% or more of options granted during the year

iii. Identified employees who were granted options, Noneduring any one year, equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the company at the time of grant

k. Diluted Earnings Per Share (EPS) pursuant to issue of Rs. 6.34shares on exercise of option calculated in accordance with Accounting Standard (AS) 20 - Earnings Per Share

l. Where the company has calculated the employee Net Profitcompensation cost using the intrinsic value of the stock As reported 670,286,598options, the difference between the employee Add - Intrinsic value 46,869,708compensation cost so computed and the employee Less - Fair Value 47,386,062compensation cost that shall have been recognized if As Adjusted 669,770,244it had used the fair value of the options, shall be disclosed. The impact of this difference on profits and on EPS of Basic EPSthe company shall also be disclosed. As reported 6.34

As Adjusted 6.34

Diluted EPSAs Reported 6.34 As Adjusted 6.34

m.1 Weighted average exercise prices for options whose exercise price -i. equals market price Nilii. exceeds market price Niliii. is less than market price Rs. 200

m.2 Weighted fair values for options whose exercise price -i. equals market price Nilii. exceeds market price Niliii. is less than market price (As on grant date) Rs. 260.39

n. A description of the method and significant assumptions No options have been granted during 2008-09used during the year to estimate the fair values of options, including the followingweighted-average information: -1. risk free rate 2. expected life3. expected volatility4. expected dividends and 5. the price of the underlying share in the market at the

time of option grant.

AUDITORS' CERTIFICATEWe have examined the books of account and other relevant records and based on the information and explanations given to us, certify that in our opinion, the company has implemented the Employees' "Share a Vision" Stock Option Scheme, 2007, in accordance with the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and resolution of

ththe Company in the 87 Annual General Meeting held on July 20, 2007. For M/s P. G. BHAGWAT

Chartered Accountants

Pankaja BhagwatPartner

Membership No. Pune : June 2, 2009 86155

KIRLOSKAR BROTHERS LIMITEDth

9

Page 12: Annual Report 2008-09

2008 saw the world economy go through a difficult phase.

The world's economic growth rate is projected to fall to half

percent or even zero in 2009, the lowest, since the Second

World War. Despite wide-ranging strategic initiatives

implemented by governments the world over, the financial

strain remains acute, bringing down the large economies. For

instance, Germany, France, Spain, UK, Japan and United

States, are projected to contract in 2009. Imports to these and

many other developed nations too are expected to decline

during the year. A sustained economic recovery seems

unlikely until the financial sector's credibility is restored and

credit markets are unclogged. Towards this end, the monetary

and fiscal policies need to become even more supportive of

aggregate demand and maintain this stance while developing

strategies to ensure long-term fiscal sustainability.

International cooperation is the key in formulating and

implementing these policies.

Management Discussion and Analysis

WORLD ECONOMY

10

Page 13: Annual Report 2008-09

In the last four years (2004-05 to 2007-08), the Indian

economy shifted gears to a high growth phase, recording

7.5%, 9.4%, 9.6% and 9% GDP growth rates respectively.

Though there is a view that the Indian growth trajectory was

led by external trade and foreign capital inflows, it was also a

product of internal growth, albeit complemented by exports.

India's GDP growth in the quarter ending December 2008, fell

to 5.3% - from 8.9%, a year earlier. Inflation fell to a 6 year

low of nearly 3% late February, 2009. Forex deposits have

fallen by more than 30% in less than 6 months.

Analysts expected the Indian economy to grow at about 7% in

2008-09, as compared to the last three years when it rose 9%

approximately. It is expected to dip further in 2009-10 as a

result of the global economic crisis. However, fiscal deficit will

act as a stimulant and deter GDP growth to slip below

6 - 6.5%.

Thus, the Indian economy remains relatively unaffected by the

financial crisis. In fact, India is showing symptoms of a mere

'slowdown' whereas other developed nations are reeling

under impact of 'recession'. This slowdown however, is likely

to result in reduced tax and excise collections. Fiscal deficit

may increase exponentially posing major challenges before the

new government.

INDIAN ECONOMY

KIRLOSKAR BROTHERS LIMITEDth89 Annual Report 2008-09

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GLOBAL PUMP MARKET OUTLOOK AND GROWTH DRIVERS

The world pump market is governed by the demand in United

States, European Union and Japan. With these countries

burdened by recession, market forecasts up to 2013 have

been revised to a compounded average growth rate of just

0.3% from 3-4%. The global market for centrifugal pumps in

2009 and 2010 is likely to contract, while that for positive

displacement pumps will post good gains. Consolidation of

players in the pump industry through mergers and

acquisitions, may catch momentum in 2009 -10 in spite of the

present recessionary trends.

Although water and sewage, power, building services,

industry, oil and gas are major drivers of the global pump

market, for KBL, water, power and irrigation will continue to

be chief market drivers.

Factors affecting growth of the global pump industry:

Per capita availability of water in Asia is less than other

continents; and it will continue to grow rapidly, thus

increasing demand for delivery and treatment of that

water. Rising consumption with decreasing supplies of

uncontaminated water is pushing up the market of

desalination plants for treating seawater.

Urbanization of Asia has seen relocation of more than one

billion migrants from villages to cities. This is creating

pressure on the existing infrastructure including delivery of

utility water and removal and treatment of wastewater.

Most governments in Asia and in Africa are likely to

increase their spending on infrastructure projects like

irrigation and drinking water schemes.

The world is moving towards energy efficient products and

services to be able to sustain the growth rates achieved in

the past few years with petroleum being the primary

energy source.

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STRATEGY AND POLICY

Keeping pace with the Indian economy, KBL too has grown in

the last four years (from 2003-04 to 2007-08) at a

compounded average growth rate of 32%. We did expect

sustaining this growth rate would pose a challenge; like time

and cost over-runs in a few projects, rising material costs,

orders with fixed prices, maintaining positive cash flows and

increasing focus on products.

At KBL, we began changing ourselves last year itself to face

these challenges. Reasons have been identified and corrective

actions addressing issues in working capital management are

being implemented.

These strategies, however, will take a little time to give us

expected results in operations, especially on the backdrop of

the global financial crisis and slowdown.

To develop a more customer and market oriented

organization, KBL has restructured itself into sector-wise

business groups, corporate global marketing and global

sourcing as new functions. It has also created a pool of

manufacturing operations and existing corporate functions to

nurture an innovation driven work culture and customer

centric organization.

As for manufacturing operations, world class operational

efficiency targets will be the driving force. The newly created

corporate level functions of sourcing, marketing, business

development and strategy will provide a cutting edge to

formulate strategies for sustainable growth.

KIRLOSKAR BROTHERS LIMITEDth89 Annual Report 2008-09

As a policy, we will use resources judiciously by employing

efficient equipment, create less waste, follow green concepts

and try to make the world a better place to live in. Our

corporate office, is an indication of our commitment to

conserve nature.

This mindset has found its expression in various innovative

endeavors as follows:

BEE rated five star energy labeling of our monobloc

pumpsets [saving power]

Pending patent for the innovative solar pump controller

[using renewable power]

Automatically switching dual voltage motors based on

rural and varying line voltages, for which the patent

application is on the anvil [saving different pumps for

different areas, thereby saving inventory]

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We have crossed the INR 2380 million turnover in our export

business. Our international strategy will continue to focus on

creating the global brand 'Kirloskar' in centrifugal pumps and

pumping systems. While creating a global brand, we will act

local while going ahead to create a multi cultural, multi

national team to establish this global brand.

We have created more than 15 new references in Europe

under brand 'Kirloskar' in pumps. Orders have flowed in from

Chile to Egypt and Vietnam; from varied sectors, like energy,

irrigation, industry, building, etc. making our presence felt

worldwide.

Orders from Southern Regional and Balikera Hunter Water,

Australia, Astana in Kazakhstan and Sohar in Oman have been

executed satisfactorily.

INTERNATIONAL BUSINESS STRATEGY

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Page 17: Annual Report 2008-09

Exponentially rising fiscal deficit, lower tax and excise

collections and falling exports are likely to delay the tough

decisions that the Central Government may require to take to

fight economic slowdown. This can delay infrastructure

project decisions and fund flows.

Capacity enhancements effected by the top 20 global pump

players, before the slowdown will make it difficult to have full

capacity utilization and lead to price competition, straining

profit margins.

As the economic downturn seems to continue through

2009-10, dangers of deflation loom ahead.

Buoyancy of raw material prices, extraordinary exchange rate

fluctuations like those observed in 2008 up to August 2008

and after, may cause major problems during execution of

contracts.

KIRLOSKAR BROTHERS LIMITEDth89 Annual Report 2008-09

RISKS AND CONCERNS

15

Page 18: Annual Report 2008-09

Sectoral Overview

POWER

United States were commissioned at the Sandow 5 Project in

Texas for Bechtel, United States of America. Similarly the first

condensate extraction pump for overseas market was

dispatched for Glow Thailand Project, Doosan. Other major

power project orders for Isle of Grain and Staythorpe in United

Kingdom from Alstom, Sugen in Gujarat for Siemens Germany

were executed on time. With success stories like these, the

Kirloskar brand is getting strengthened in the global power

sector.

This business group caters to the needs of power industry -

conventional and renewable. Considering the chronic

shortage of power, this sector is bound to emerge as a major

market driver for decades to come. The Power group is proud

to have successfully completed the sump model test of

cooling water system for India's first ultra mega power project

of 4000 MegaWatt (5 x 800 MW) at Kirloskarvadi. This was

the largest sump model test for cooling water system to be

conducted in India. Circulating cooling water and Non-Active

Process Water (NAPW) pump packages for Nuclear Power

Corporation's Kaiga project have been commissioned. The

boiler feed pump system for Essar Power project too has been

installed and is operational. Among the prestigious orders won

this year, is the cooling water pump package for first fast

breeder reactor project - BHAVINI, in the nuclear power

segment. Our brand image in the national power industry was

used to win over the customer in the overseas markets.

Approvals from few more global EPC contractors in Power

sector were obtained and we also received orders from them

including:

Maire and Technimont, Italy, for Colbun Project, Chile

Metka Metal Construction, Aliveri V, Greece

Sevilla, Lebrija I, Spain

Alstom, Switzerland (6th repeat order) for Fujirah

The first two cooling water pumps supplied by Kirloskar in the

&

&

&

&

4CW pumps installed at Sandow 5 project, USA of Bechtel

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Page 19: Annual Report 2008-09

HUDA, Hyderabad for up-gradation of a 20 MLD sewage

treatment plant

Tikoe and Thetsane Industrial Area, Maseru, Republic of

Lesotho for a 20 MLD water treatment plant

We have won the trust of authorities at Cape Preston,

Australia, for desalination project pumping 144,000 cubic

meters of water per day. We are supplying them pumps in

super duplex stainless steel with spares, which marks the

entry of KBL in the global desalination market.

In line with our mission to be in water business and enhance

reach and capabilities of this business group, we have signed

an Memorandum of Understanding with Enzen Water

Solutions Private Limited, They have expertise in water

distribution, management modeling and technology which will

enable us to address the BOOT /BOT projects or public private

partnership projects coming up in this sector.

The Sohar project in Oman was the first international EPC

contract won by us against stiff competition. The project

involved setting up a sea water pumping system for the

common cooling water system. The entire project activity

demonstrated our project management capabilities and

expertise.

WATER RESOURCE MANAGEMENT

This business group addresses the needs of water supply,

water treatment and waste water treatment segments.

Water, like power is a major market driver for the pump

industry and equipment peripheral to water industry. Water

stressed regions in the world are on the rise, thanks to

uncurbed urbanization, growing industrialization, increasing

pollution levels and absence of sufficient teeth to the

legislation to deal with water pollution across the world. India

is no exception. Such a scenario demands better and better

water management, with latest technologies, cheaper

methods and sustainable operations.

This business group continues to serve municipal

corporations, water and sewerage boards of India. Delhi Jal

board's Vishwakarma project, Nagpur municipal corporation's

Gorewada and Mahadula projects and Maharashtra Jal

Pradhikaran's Malegaon project went on stream this year. At

Vasna project, a six stage well point dewatering system was

deployed. Also the first sewage pumping station of RUIDP,

Kota, with our newly developed and bigger model of

submersible sewage pumps was pre-commissioned.

We made significant in-roads in waste water treatment

segment in India as well as overseas, based on the Gondwana

Engineers Limited's strengths. Orders received include:

Steel Authority of India Llimted, Bhilai for a 30 million liters

per day (MLD) sewage treatment plant

Vadodara municipal Sewa Sadan for a 8.5 MLD sewage

treatment plant

Pune municipal corporation for a 40 MLD sewage treatment

plant

4Kirloskar pumping station at Sohar Industrial Port Company (SIPC), Sohar, Oman

KIRLOSKAR BROTHERS LIMITEDth89 Annual Report 2008-09

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IRRIGATION

This business group primarily meets the needs of irrigation at

macro level through the infrastructural projects and supplying

appropriate products on a mass scale to institutional irrigation

customers, generally at government level. Projects in the past

from the World's largest pumping system on Narmada Branch

canal for SSNNL to the various lift irrigation projects executed

in Andhra Pradesh have been handled by this business group.

All the remaining pumping stations, which are a part of world's

largest pumping system are close to being commissioned.

With focus on completion and execution as a strategy this

year, the group completed the execution for Hanmapur,

Rampur, Mulwad Baluthi, Sinamoda, Devlapur, Guthpa,

Brandix, Taraka, Thimmapur, Rajan, Kollur, Kawardha and

Jalundra lift irrigation schemes in Karnataka, Andhra Pradesh

and Gujarat.

Parallel operations of pumps at all the three sites - Intake

(Gangaram), Nagaram and Bhimganpur for the Godavari lift

irrigation scheme were also successfully completed. Other

major projects like Gandikota, PADA and Bheema are nearing

completion.

Along with the corporate international institutional business

function, this sector business group plans to aggressively

target the international irrigation market. Green revolution

projects in the African continent will be targeted by leveraging

the success stories of our irrigation projects in Senegal and

Laos. Orders worth US $25 million were booked thanks to this

strategy of taking up international irrigation projects. The

result invoicing worth US $ 10 million completed this year.

4Khed pumping station, Narmada Water Resources, Water Supply and Kalpasar Department

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INDUSTRY

KIRLOSKAR BROTHERS LIMITEDth89 Annual Report 2008-09

This business group takes care of the requirements coming

from the different industrial segments such as metal

manufacturing (mainly Steel), mining (Coal and others) ,

process oriented segments like cement, chemicals, paper,

sugar, textile, pharma, and other industries.

This business sector had to bear the maximum brunt of the

financial crisis, which adversely affected its performance.

Therefore, the sector adopted a 'focus' based approach, in

which only the customers with firm requirements and sound

financial health were approached. The strategy was to build

long term relationships with industrial customers, to get

repeat orders and minimize cost in terms of marketing efforts

and time lost. Our Customer Relationship Management (CRM)

initiatives were a significant step in this direction. The success

stories in steel, textile, sugar and mining sectors were

strategically leveraged in international markets. As a step

towards entering the North American market, an agreement

with the sales and service partner 'Hydro Inc.' for the Steel

industry in United States of America was finalized. Excellent

ratings received from steel major Pohang Iron and Steel

Company, illustrate the resolve of the unit towards fostering a

relationship based on customer confidence. The group

concentrated on the market diversification as a part of the risk

mitigation strategy. Orders received from Austria and Yemen

were a part of this strategy. Orders from West Coast Papers

were won against stiff competition from major players in the

pumps market. This exhibits our capability for servicing critical

application areas.

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OIL AND GAS

This business group provides customized solutions to the Oil

and Gas industry. The dynamics of the oil and gas industry

require special attention on our part because of critical nature

of applications and adherence to the strict norms and

standards. So a business group exclusively focused on Oil and

Gas industry was formed.

After the restructuring, the group has focused on

understanding the needs of this sector very systematically and

is in the process of firming up strategic development and

business plans for the coming years.

It has also assessed its present strength in oil and gas industry

and is leveraging these strengths to win customer confidence

from the select applications to begin with.

To cite a few examples, successful packaged pumping

solutions have been given to ONGC at Shibsagar (India), Al

Mazroui Engineering for SEWA, Emirates Oil company,

Sharjah (UAE) and Reliance, at its Jamnagar facility. The

highlight at Reliance was the successful demonstration of

sequential auto-start.

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This business group caters to the demands of infrastructure

development projects - particularly those in the real estate.

Rapid urbanization is the market driver for this fast growing

market in the recent past. The marketing activities of the

group laid emphasis on providing an excellent customer

experience. Launch of on-line fire pump selection package

based on specifications through the web portal was an

example. The group won prestigious orders from Delhi Metro

Rail Corporation for its phase II project, vying with formidable

international competition. Mumbai International Airport,

Thiruvananthapuram international airport, Jawaharlal Nehru

stadium - Delhi for 2010 Common-wealth games and Metro

Rail - Kolkata were a few other establishments, which trusted

Kirloskar pumping systems. A 24 hours service backup was

put in place through a strategic nationwide tie up and proved

to be a source of competitive advantage in getting business.

The group was successful in expanding its business across

different geographies For e.g., package order secured from the

government of Tajikistan which won us several orders for the

dewatering, sewage submersible design pumps.

Commercial Complex

Hospital

Multiplex

Water Recycling

Swimming Pool

Water Distribution

Water Treatment PlantSewage Treatment Plant

Educational Institutes

Fire Fighting Pump House

Hydro Pneumatic andHVAC Pump House

KIRLOSKAR BROTHERS LIMITEDth89 Annual Report 2008-09

BUILDING AND CONSTRUCTION

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DEFENSE AND MARINE

This business group offers customized solutions to the

Defense and Marine segments. Being a new segment for KBL,

our team spent more time in understanding the needs of this

sector and assessing our strengths to match the requirements.

We have made a start by organizing our activities for long term

business relationships. We have approached authorities in the

defense establishment and marine organizations from where

we have received initial positive response. The orders from

Pipavav Shipyard illustrate the start of a successful venture.

Business linked development plans are being drawn out

carefully for both the segments of this sector, understanding

the nuances of customer needs and priorities.

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This business group looks after our channel partners and the

business coming through them. This is one of the most

important business groups, which is in charge of all our

distributors, dealers and retail outlets where our mass

produced pumps are made available to the customers.

Standard pumps, standardized packages, motors, alternators

and allied standard peripherals are sold through this group.

Volume driven cost leadership is their guiding principle behind

the strategies adopted. Steps are also being taken to make a

shift to innovative products to differentiate ourselves from

commodity like products in the market place. 5 star energy

rating by Bureau of Energy for our monobloc pumpsets for the

least energy consumption, tie up with Copper Promotion

Council for energy efficient motors, pumpsets and energy

auditing are some examples of these differentiating strategies.

In addition to the marketing's first P for product, this market is

quite influenced by the other 3 P's of marketing - promotion,

place and people. Strategies of over 100 new distribution

Memorandum of Understandings, system for E-warranty,

retailer certification, scratch cards scheme for domestic pump

retailers and the scheme of pump replacements illustrate this

group's balanced focus on all the 4 P's of marketing.

Considering the credit crunch resulting from financial crisis,

the commercial policies too have been tightened and have

been made cash centric, keeping the volume driven cost

leadership strategy in mind.

4First energy efficient surface pump in India with 5 star rating by The Bureau of Energy Efficiency (BEE)

KIRLOSKAR BROTHERS LIMITEDth89 Annual Report 2008-09

DISTRIBUTION

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CUSTOMER SUPPORT AND SERVICE

In line with the strategy of providing excellent customer

experience, the focus on customer support and service is

being reoriented with pragmatic measures such as:

Improving the mechanism of listening keenly to end users

through our retail chain or original equipment

manufacturers

Prompt response to the customer calls by making adequate

manpower and IT architecture available through dealers

and service centers

Re-organizing the set up with separate teams for spares

and service and one stop outlets

Focusing on annual maintenance and operation and

maintenance contracts with long term arrangement

World class delivery mechanism of spare parts by

rationalizing the 16 digit part numbers

This customer service strategy will help create sustainable

competitive advantage in the long run for KBL.

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This manufacturing facility, with India's second industrial

township, established in 1910 enters its centenary year in

2009-10. It has received the Occupational Health and Safety

Assessment Series, OHSAS 18001 certification, and a

National Award for Excellence in Water Management, from

the Confederation of Indian Industry (CII) for in 2008 in

recognition of efforts on conservation and the effective use of

water and energy as well.

The 1000 parts per million (ppm) concept has been

implemented across the small and medium pump shops for

reducing rejection and a policy of continuous improvements in

various operational parameters was implemented. Small

capital investments were made for assembly modernization,

impeller cleaning booths, medium frequency induction

furnaces for cast iron and non-ferrous foundries and laser

engraving machines for spares in small and medium pumps.

Development of 60 Hertz frequency drive for testing of large

pumps up to 4 MegaWatts, up-gradation of painting processes

to meet the norms of global EPC contractors like Bechtel and

Alstom, wooden set up for sump model to reduce cost and

installation time, heat transfer pump manufacturing facilities

like clean room and test set up, capability of single piece

casting weighing 9.2 tons are a few examples of resources

added in the large pump shop.

Kirloskarvadi has received certificate of registration from

Directorate General Quality Assurance (DGQA) for supply of

KIRLOSKARVADI

Works Overview KIRLOSKAR BROTHERS LIMITEDth89 Annual Report 2008-09

'Centrifugal Pumps and Valves' as per Indian naval

requirements after verification of capability and capacity.

Managing liquidity, supply chain and growing expectations of

customers are the main challenges facing Kirloskarvadi works

and we have a right combination of experience and youth to

face these challenges successfully and achieve its vision and

mission.

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Page 28: Annual Report 2008-09

DEWAS AND SHIRVAL

KBL became the first pump company in India to achieve the

distinction of FIVE star rating from Bureau of Energy

Efficiency, Government of India for the 8 models of 'KDS'

series monobloc pumpsets manufactured in Dewas. In view of

the energy crisis being encountered globally, there is a need

for energy efficient products. About 30% of electricity

generated in India is consumed by agricultural sector. Kirloskar

monobloc pump models deliver water at efficiencies at least

20% more than ISI requirements. Savings in terms of energy

are up to 30% or more.

The Dewas factory obtained Level 3 rating from Total Cost

Management (TCM) maturity model operational level

efficiency for first time in the country. The factory's congenial

atmosphere got a boost by the formation of internal union of

workmen. Facilities for in-house machining along with

assembly, testing, painting and packing for aluminum motors

have been created. Processes focused on significant

improvements in quality and aesthetics were also deployed.

Solar pump demonstration was conducted at Bhatinda and

Ludhiana, in association with Punjab Energy Development

Agency (PEDA). These demonstrations were attended by

senior PEDA officials and around 200 farmers.

Demonstrations were also conducted at M.P. Urja Vikas

Nigam, Bhopal, on the occasion of 'Rajiv Gandhi Akshay Urja

Divas'. The event was graced by the State Energy Minister

and Senior officials of M.P. Urja Vikas Nigam and MNRE. Solar

panels of 4000 Wp were installed in the solar park cum lab

created at Dewas. These panels are being used for testing of

solar pumping systems. During non-testing period, these

panels are being used for energizing the pumps at the Effluent

Treatment Plant, which result in energy savings.

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Page 29: Annual Report 2008-09

KONDHAPURI

43000 mm Butterfly Valve under manufacturing

KIRLOSKAR BROTHERS LIMITEDth89 Annual Report 2008-09

Our Kondhapuri factory exceeded its targets for first time in

the last three financial years on the basis of process and

productivity improvements.

A new manufacturing facility within the factory was

commissioned with capital investment of about INR 90

million. This facility will help increase the large size valve

capacity as well as capability to make up to 4000 mm size

Valve. We have obtained CE marking certification for Butterfly

Valves and Sluice Valves. The factory successfully completed

the development and supply of many new products and

received prestigious orders from the water, energy and

industry sectors.

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HUMAN RESOURCE MANAGEMENT

Our HR team would like to share the encouraging Gallup

Survey results from the employee engagement survey

conducted recently. We have been doing this survey from

2004. We have also taken steps based on the concerns

observed and the opportunities for improvements pointed out

from the survey. These efforts by our HR team have increased

the overall satisfaction, advocacy, loyalty and employee

engagement levels, pride score, leadership communication

score and work-life balance score significantly. Superior /

subordinate quality time and management have shown

improvement, although not significant. A few areas are still

found to be critical and clarity of roles is not evident.

Necessary steps have already been taken to ensure

improvement in 2009-10. Harmonious industrial relations

have been maintained at all our manufacturing locations.

Amity International University awarded KBL with an HR

Excellence Award in 2008.

The total number of employees is 2,932.

I AM KBL

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Page 31: Annual Report 2008-09

This function now stands integrated with product

development and engineering departments at all the factories

categorized under the central research and engineering

function. This has enhanced involvement of the central

research team up to production stage in all the new

development projects and not limited to computer aided

designs. This will expedite the new product development

process and reduce the time from market feedback to drawing

board to prototype for standard products.

A number of standard product up-gradations and

developments in various pump ranges for diverse applications

were completed this year. Customized developments of

metallic volute pumps, concrete volute pumps for ultra mega

power projects as well as KBL's largest ever vertical mixed

flow pumps are the highlights of developments made this

year. Computational Fluid Dynamics (CFD) analysis of 27 vital

projects and structural analysis of 20 critical projects was

carried out for customers, both in India and abroad.

RESEARCH, DEVELOPMENT AND ENGINEERING

4CFD analysis of Rajivsagar PS1 Sump 4Sarju Runner Solid Model

KIRLOSKAR BROTHERS LIMITEDth89 Annual Report 2008-09

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GLOBAL MARKETING, BUSINESS DEVELOPMENT AND STRATEGY

This corporate function was a new creation after the

restructuring and redefining the past functions to focus on

marketing in its true classical meaning, specific business

development projects and strategy dialogue process. The

various roles played by this department include those in

International distribution, CRM - lead generation and

nurturing, market and competitive intelligence, business

development, mergers and acquisitions, brand promotion and

marketing communication and last but not the least the

strategic dialogue. The department is expected to perform to

add value to business strategies and assist in driving corporate

strategies based on environment and analysis of market

situation.

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Page 33: Annual Report 2008-09

FINANCIAL PERFORMANCE

The company has achieved a growth of over 20% in net sales

over the last year to reach INR 18,309 million.

Profit before tax is INR 982 million as against INR 1500 million

in the previous year. The main reasons in reduction in

profitability are higher rate of interest and cost of finance,

delay in execution of certain projects and rise in raw material

cost for part of the year.

Borrowings have further gone up from INR 1912 million to INR

3204 million.

Depreciation and amortization has increased to INR 207

million from INR 182 million in the previous year, while interest

has increased from INR 169 million to INR 303 million.

KIRLOSKAR BROTHERS LIMITEDth89 Annual Report 2008-09

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BRIDGING OCEANS

4Sanjay Kirloskar meets the Honorable President of Senegal, SE Maitre Abdoulaye Wade, New Delhi during Africa Summit

4Malik Akhtar at the Valves factory at Kondhapuri

4T C Venkatsubramanian and Prabhakar Dalal, of EXIM Bank at KBLs showroom in Vientiane, with L H Dabi, Vice President, Corporate International Institutional Business

4Ms. Christine Ting Sing Ling, Engineer and Ravi Chandran, Senior Manager from Public Utilities Board, Singapore, visiting Kirloskarvadi plant

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EXHIBITING EXCELLENCE

4Achema 2009, Frankfurt Germany

4Singapore International Water Week 20084Aquatech, Amsterdam, Netherlands

4Power-Gen International, Orlando, USA

4Power-Gen Europe 2008 - Milan, Italy 4Pumps, Valves and Systems Expo, Baroda

KIRLOSKAR BROTHERS LIMITEDth89 Annual Report 2008-09

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The company has adequate internal control system. Regular

internal audits are being conducted, as per the audit calendar

drawn at the beginning of the year, to examine the efficacy

and adequacy of internal controls. For this purpose, the

company has continued the practice of appointing

professional firms of chartered accountants.

The internal audit reports are initially presented to the

executive committee of the management, consisting of the

Chairman and two Executive Directors. The recommendations

made in these reports are taken up for implementation by this

executive committee.

The final audit report presentation is made to the audit

committee during which the executive committee, as

mentioned above, apprises the audit committee of its plans to

implement audit recommendations.

On the basis of these reviews, the audit committee directs the

management to take appropriate actions.

The company has initiated audit procedures in the subsidiary

companies.

INTERNAL CONTROL SYSTEM

Cautionary Statement: within the meaning of applicable security laws and regulations. Actual results may vary from those expressed or implied depending upon economic conditions, government policies and incidental factors.

Statements in the Management Discussion and Analysis describing the company’s projections and estimates are forward looking statements and progressive

34

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REPORT ON CORPORATE GOVERNANCE

1. The Company's philosophy on Code of Corporate Governance :

The Company strongly believes that the system of Corporate Governance protects the interest of all the stakeholders by inculcating transparent business operations and accountability from management towards fulfilling the consistently high standard of Corporate Governance in all facets of the Company's operations.

2. Board of Directors :

The Board comprises of an optimal complement of independent professionals as well as Company executives having in-depth knowledge of business. As on the date of this report, there are thirteen directors of whom one is Managing Director, one is Executive Director, two are Whole Time Directors and nine (69%) are non executive directors of whom seven (53%) are independent directors.

During the financial year under review, six Board meetings were held on the following dates: April 22, 2008, July 18, 2008, August 12, 2008, October 23, 2008 , January 20, 2009 and March 18, 2009

None of the Directors on the Board hold the office of director in more than 15 companies or membership of committees of the Board in more than 10 committees or chairmanship of more than 5 committees.

The details are explained in the Table below :

Mr. Sanjay Kirloskar and Mr. Rahul Kirloskar are brothers. None of the other directors is related to any other director.

@ CMD - Chairman and Managing Director, VC - Vice Chairman, ED - Executive Director,

NED - Non Executive Director, I - Independent, WTD - Whole Time Director.

* Committee Membership of Audit Committee and Investors' Grievance Committee is considered for this purpose.

(1) Directorships in Private Limited Companies, Foreign Companies are included in the above table.

(2) An independent director is a non-executive director who, apart from receiving director's remuneration, does not have any material pecuniary relationship or transactions with the Company, its promoters or its management or its subsidiaries and associates which in the judgement of the Board, may affect his independence of judgement and complying with other conditions as prescribed under Clause 49 of the listing agreement.

(3) All the relevant information suggested under Annexure 1A of Clause 49 is furnished to the Board from time to time.

3. Code of Conduct :

The Company has introduced a Code of Conduct for Directors and members of Senior Management. The Code is made effective from April 1, 2005. It has been uploaded on the Company's website, www.kbl.co.in All Board members and senior management personnel have affirmed compliance with the code. A declaration to that effect signed by Mr. Sanjay Kirloskar, Chairman and Managing Director is appearing elsewhere in the annual report.

Mr. Gautam Kulkarni VC/NED 6 Present 7 2/0Mr. Vikram Kirloskar ED 3 Absent 10 4/2Mr. S.S. Marathe(Upto 28.09.2008) NED (I) 3 Present Not Applicable Not ApplicableMr. M.S. Kirloskar NED (I) 6 Present 0 0/1Mr. M.G. Padhye(Upto 16.12.2008) NED (I) 4 Present Not Applicable Not Applicable Mr. S.N. Inamdar NED (I) 4 Present 10 2/4Mr. Rahul Kirloskar NED 6 Present 12 1/0Mr. R.K. Srivastava WTD 6 Present 5 0/0Mr. U.V. Rao NED (I) 6 Present 7 3/2Mr. P.S.Jawadekar NED (I) 5 Present 3 1/0Mr. J.R. Sapre WTD 6 Present 4 0/0Mr. A.N. Alawani NED (I) 6 Present 6 4/0Mrs. Lalita D. Gupte NED (I) 3 Present 7 5/0Mr. Pratap B. Shirke NED (I) 5 Absent 9 2/0

Mr. Sanjay Kirloskar CMD 6 Present 13 2/1

Name of Director

Designation / Category of Directorship @

Board Meetings attended

Attendance at last AGM

No. of other Directorships

held

No. of Committees of which Member /

Chairman*

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4. Audit and Finance Committee :

The Audit and Finance Committee was constituted in July, 2000. This committee is constituted in line with the provisions of Clause 49 of the Listing Agreement read with section 292A of the Companies Act, 1956. It comprised of five Directors viz. Mr. S. N. Inamdar as the Chairman, Mr. S. S. Marathe, Mr. Gautam Kulkarni, Mr. U. V. Rao and Mr. P. S. Jawadekar as Members. Mr. S. N. Inamdar is a Non-Executive Independent Director. After the sad demise of Mr. S. S. Marathe, senior member of the Board, on September 28, 2008, the Audit and Finance Committee was reconstituted and Mr. Pratap B. Shirke has been appointed as Member of the Committee with effect from October 23, 2008. Thus the Company fulfils the requirements under the code.

The terms of reference of the Audit and Finance committee include the matters specified in clause 49 (II) of the Listing Agreement with the Stock Exchanges. The terms of reference of the Audit and Finance Committee includes the following:

A)

�Overseeing the Company's financial reporting process and disclosure of its financial information to ensure that the financial statement is correct, sufficient and credible.

�Recommending the appointment of external auditors, fix their remuneration.

�Reviewing with the management the quarterly & annual financial statements before submission to the Board focusing primarily on

— Any change in the accounting policies & practices.

— Major accounting entries based on exercise of judgement by management.

— Significant adjustments arising out of audit.

�Qualifications in draft audit report.

�Compliance with Stock Exchanges legal and accounting requirements concerning financial statements.

�Any related party transactions.

�Structure & strength of internal audit department reporting structure, coverage and frequency of internal audit, financial & risk management policies particularly relating to foreign exchange exposure.

�Defaults in the payment to depositors, debenture-holders, shareholders & creditors.

�Reporting by management on key financial ratios.

�Reporting on recovery of dues, delays and reasons therefor.

�Statements accompanying Public Issue of any security.

�Reporting on branch audits, if any. Full access to information and data.

�To obtain outside legal or other professional advice.

�To secure attendance of outsiders with relevant expertise, if it considers necessary.

�Approval of payment to statutory auditors for any other services rendered by statutory auditors.

�Matters required to be included in the Directors' Responsibility Statement to be included in the Board's report in terms of clause (2AA) of section 217 of the Companies Act, 1956.

�Discussion with internal auditors on any significant findings and follow up thereon.

�Reviewing the findings of any internal investigations by the internal auditor into matters where there is suspected fraud or irregularity or a failure of internal control systems of a material nature and reporting the matter to the Board.

�Discussion with statutory auditors before the audit commences, about the nature and scope of audit as well as post audit discussion to ascertain any area of concern.

�Carrying out any other function as per directions from the Board from time to time.

B)

�Power to investigate

�Power to summon officers

�Power to access information and data

�Power to review systems/controls

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Member's Name No. of Meetings attended Member's Name No. of Meetings attended

Mr. S. N. Inamdar 6 Mr. S. S. Marathe(Upto 28.9.2008) 3

Mr. Gautam Kulkarni 5 Mr. U. V. Rao 6

Mr. P. S. Jawadekar 5 Mr. Pratap B. Shirke(w.e.f.23.10.2008) 1

During the year, six Audit and Finance committee meetings were held on April 22, 2008, July 18, 2008, September 19, 2008, October 23, 2008, January 20, 2009 and February 6, 2009

Attendance at Audit and Finance Committee meetings :

5. Remuneration of Directors :

Remuneration Committee

The remuneration committee was constituted in the year 1999. The Members of the committee were, Mr. S. S. Marathe - Chairman, Mr. S. N. Inamdar, Mr. M. G. Padhye and Mr. Gautam Kulkarni

However, after the sad demise of Mr. S. S. Marathe on September 28, 2008, Mr. P. S. Jawadekar, has been appointed as Chairman of the Committee on October 23, 2008.

Consequently, due to the resignation tendered by Mr. M. G. Padhye with effect from December 16, 2008, Mr. A. N. Alawani has been appointed as a member of the Committee on January 20, 2009. The present Members of the committee are as under:-

Mr. P. S. Jawadekar, Chairman, Mr. S. N. Inamdar, Mr. Gautam Kulkarni and Mr. A. N. Alawani

During the year, Remuneration Committee meetings were held on April 22, 2008 and on July 18, 2008.

Attendance at Remuneration Committee Meetings :

Member's Name No. of Meetings attended Member's Name No. of Meetings attended

Mr. S. S. Marathe(Upto 28.9.2008)

Mr. M.G. Padhye 2 Mr.Gautam Kulkarni 2(Upto16.12.2008)

Mr. P. S. Jawadekar NA Mr. A. N. Alawani NA(w.e.f.23.10.2008) (w.e.f.20.01.2009)

2 Mr. S. N. Inamdar 2

Remuneration to Directors :

—to time and confirmed by the Board of Directors.

— Non Executive Directors were paid a sitting fee of Rs.10,000/- for every meeting of the Board and Committee attended by them. Based on their membership of various committees and their time involved in the operations of the Company, the non-executive directors will be paid up to an aggregate amount of Rs. 7,565,000/- for the year ended March 31, 2009, by way of a commission.

— There are no pecuniary relationships or transactions of the non-executive directors' vis-a-vis the Company.

— All elements of remuneration package for all directors have been provided in the statement hereinafter.

— Except whatever is stated in the statement, there is no other fixed component or performance linked incentives to any director.

During last year, under the Employees' "Share a Vision" - Stock Option Scheme, 2007 (ESOS - 2007), 20,000 stock options were granted to each of the two Non-promoter whole-time Directors and 10,000 stock options were granted to each of the Independent Directors. Under the scheme, each option is convertible into One Equity Share (Face Value Rs. 2/-) of the Company upon vesting, at an Exercise price of Rs. 200/- per share.

Subject to the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and the terms of the ESOS - 2007, the options, after one year of the grant would vest in 3 annual instalments of 30%, 30% and 40% and the same should be exercisable within a period of 3 years from the date of vesting.

The payments made to executive directors have been reviewed by the Remuneration Committee from time

First tranche of options i.e. 30% of the total options have been vested on August 31, 2008.

KIRLOSKAR BROTHERS LIMITEDth

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$ subject to approval of Members*Includes pension as an ex-employee of the company.

Directors' Service Contracts' Details :

Executive Directors Service Contract and Period Severance Fees

Mr.Sanjay Kirloskar Agreement dt.19.11.2005 :: Period: 19.11.05 to 18.11.10 **

Mr.Vikram Kirloskar Agreement dt. 26.07.2006 :: Period: 06.06.06 to 05.06.11 Nil

Mr. R. K. Srivastava Agreement dt.22.10.2005 :: Period: 19.09.05 to 18.09.10 Nil

Mr. J. R. Sapre Agreement dt.28.07.2005 :: Period: 29.04.05 to 28.04.10 Nil

** Three years or unexpired period, whichever is less.

Details of remuneration paid/payable to Directors for the year 2008-09 are as follows :

Statement showing number of Equity Shares of Rs. 2/- each of the Company held by the present Non Executive Directors as on March 31, 2009 :

Non–Executive Directors No. of shares % to paid up capital

Mr.Gautam Kulkarni 55665 0.053Mr. M. S. Kirloskar 1500 0.001Mr. S. N. Inamdar 43755 0.041Mr. Rahul Kirloskar 14985 0.014Mr. U. V. Rao -- --Mr. P.S.Jawadekar -- --Mr. A. N. Alawani 10000 0.009Mrs. Lalita D. Gupte -- --Mr. Pratap B. Shirke -- --

Name ofDirector Fees on Profits $ to

StatutoryFunds

(Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.)

Sitting Commission Salary Contribution Perquisites Others Total

Executive Directors Mr.Sanjay Kirloskar - 7500000 6487200 1749600 1948955 - 17685755Mr.Vikram Kirloskar - 7500000 6480000 1749600 3460548 - 19190148Mr.R. K. Srivastava - 5000000 2400000 648000 894863 - 8942863Mr. J.R. Sapre - 5000000 2400000 648000 700187 - 8748187

Non-Executive

Directors Mr. Gautam Kulkarni 130000 1160000 - - - - 1290000Mr. S. S. Marathe 80000 680000 - - - - 760000(Upto 28.09.2008) Mr. M. S. Kirloskar 80000 410000 - - - 289462* 779462Mr. M. G. Padhye 80000 340000 - - - - 420000(Upto16.12.2008) Mr. S. N. Inamdar 140000 1240000 - - - 250000 1630000Mr. Rahul Kirloskar 60000 360000 - - - - 420000Mr. U. V. Rao 130000 1285000 - - - - 1415000Mr. P.S.Jawadekar 110000 1075000 - - - - 1185000Mr. A. N. Alawani 70000 385000 - - - - 455000Mrs. Lalita D. Gupte 30000 180000 - - - - 210000Mr. Pratap B. Shirke 60000 450000 - - - - 510000

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Company Name Audit Committee Grievance Committee Committee

Kirloskar Oil Engines Limited -- Member --

Shareholders' Remuneration

6. Particulars of Directors to be re-appointed and appointed at an ensuing Annual General Meeting :

Mr. Gautam Kulkarni

Mr. Gautam Achyut Kulkarni (51) started his career in 1978 as a Trainee in Kirloskar Oil Engines Limited (KOEL). He underwent extensive training in the Servicing, production and Tech Center (R & D) until 1983.

In 1983, he was assigned to look after Kirloskar Filters Limited (KFL) and was appointed as its Chief Executive. In April 1984, he was appointed as the Managing Director of KFL. During his tenure with KFL, the Sales Income grew from Rs. 125 mn. to Rs. 600 mn.

In the year 1992, he was appointed as Vice President of the Company (KBL), while he was attached to the Corporate Office of the Group. In 1998, he joined Kirloskar Oil Engines Limited as a Joint Managing Director and played a major role in KOEL's turn around process with the help of major re-structuring and reduction in debts and interest burden of KOEL. In July 2000, he was co-opted as a director of the Company and has been appointed as the Vice Chairman.

He is a member of the Audit and Finance Committee, Remuneration Committee and Compensation Committee of the Company.

Other Directorships

Kirloskar Oil Engines Limited

Kirloskar Engines India Limited

Kirloskar Systems Limited

Achyut & Neeta Holdings & Finance Private Limited

Navsai Investments Private Limited

SPP pumps Limited, EnglandKirloskar Brothers International B.V., Netherlands

Other Committee positions :

He is holding 55665 (0.053%) Equity Shares of Rs. 2/- each of the Company. He is not related to any other director on the Board of the Company.

Mr. A. N. Alawani

Mr. Anil Narayan Alawani (64) is a Chartered Accountant and has been associated with the Kirloskar Group of Companies since 1977. Prior to his appointment in Kirloskar Oil Engines Limited, he was associated with Inex Engine Valves Limited and Kirloskar Consultants Limited. He retired as Director-Finance of Kirloskar Oil Engines Limited in August, 2005.

He has experience in Import Export and Labour Matters besides his core area of Finance and Taxation. His expertise in Corporate Tax Planning and Finance has helped the Kirloskar Group companies in financial restructuring and taxation matters. He is a member of the Remuneration Committee, Investors' Grievance Committee and Committee for Scheme of Arrangement of the Company.

KIRLOSKAR BROTHERS LIMITEDth

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Other DirectorshipsKirloskar Ferrous Industries LimitedKirloskar Integrated Technologies Limited (Formerly known as Kirloskar Kisan Equipment Limited)Kirloskar Oil Engines LimitedKirloskar Systems LimitedKothrud Power Equipment LimitedDenso Kirloskar Industries Private Limited

Other Committee positions :

Company Name Audit Committee Grievance Committee Committee

Denso Kirloskar Industries Private Ltd. Member -- Member

Kirloskar Systems Limited Member -- Member

Kirloskar Ferrous Industries Limited -- Member Member

Shareholders' Remuneration

He is holding 10000 (0.009%) Equity Shares of Rs. 2/- each of the Company. He is not related to any other director on the Board of the Company. Mr. S. N. Inamdar

Mr. Shrikrishna Narhar Inamdar (64) is a Commerce and a Law graduate and an Advocate by profession. He has had a brilliant academic career having stood first in first class in Pune and Bombay University for B.Com and LLB examinations respectively.

He has been in practice for more than three decades. He has specialization in Tax and allied laws.

He has also been associated with several charitable institutions.

He is a Chairman of Audit and Finance Committee, Committee for Scheme of Arrangement and a member of Remuneration Committee and compensation committee in the Company.

Other Directorships :

Finolex Industries Limited

Finolex Infrastructure Limited

Force Motors Limited

Kirloskar Ferrous Industries Limited

Kulkarni Power Tools Limited

Kirloskar Proprietary Limited

Sakal Papers Limited

Sudarshan Chemical Industries Limited

Ugar Sugar Works Limited

Man Force Trucks Private Limited

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Other Committee positions :

Company Name Audit Committee Grievance Committee Committee

Finolex Industries Limited Chairman Member ChairmanForce Motors Limited -- -- ChairmanKirloskar Ferrous Industries Limited Chairman -- ChairmanSudarshan Chemical Industries Limited Member -- MemberUgar Sugar Works Limited Chairman -- Chairman

Shareholders' Remuneration

He is holding 43755 (0.04%) Equity Shares of Rs. 2/- each of the Company. He is not related to any other director on the Board of the Company.

7. Shareholders' / Investors' Grievance Committee :

Company has Share Transfer, Transmission and Investors' Grievance Committee. Mr. M. G. Padhye, a non-executive independent Director was Chairman of the committee. Other members were Mr. M. S. Kirloskar and Mr. Sanjay Kirloskar. After the resignation tendered by Mr. M. G. Padhye with effect from December 16, 2008, the committee was reconstituted on January 20, 2009. The present members of the committee are Mr. M. S. Kirloskar, Chairman, Mr. A. N. Alawani and Mr. Sanjay Kirloskar.

During the year under the report, two Investors' Grievance committee meetings were held on October 13, 2008 and March 28, 2009.

Attendance at Investors' Grievance committee meetings :

Member's Name No. of Meetings attended

Mr. M.G. Padhye(Upto 16.12.2008) 1

Mr. M.S. Kirloskar 2

Mr. Sanjay Kirloskar 1

Mr. A. N. Alawani(w.e.f. 20.01.2009) -

Company has always valued its relationship with its stakeholders. This policy has been extended to Investor relationship. Company's secretarial department is continuously monitoring the complaints / grievances of the investors and is always taking efforts to reduce the response time in resolving the complaints / grievances.

Name and designation of Compliance Officer: Mr. G. P. Kulkarni, Vice President & Head - Legal and Company Secretary

No. of Shareholders' complaints received :The total number of complaints received and replied to the satisfaction of the Shareholders during the year ended March 31, 2009 were 26 and there were no complaints / Share transfers outstanding / Pending as on March 31, 2009.

With reference to clause 47(f) of the Listing Agreement, Company has designated exclusive e-mail ID as [email protected] for investors to register their grievances, if any. This has been initiated by the Company to resolve such investors' grievances, immediately. The Company has displayed the said e-mail ID on its website for the use of investors.

The Company has introduced a system in the secretarial department, through which a feedback, from shareholders who are visiting the office, is taken on department's overall services to the investors. The analysis of the feedbacks obtained from shareholders, who have visited the department for one or the other services is placed before the Investors' Grievance Committee meetings. The overall analysis of feedbacks indicates that the commendable services are provided to the investors by the secretarial department of the Company, with regard to promptness and quality of services.

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8. General Body Meetings :

Details of last three Annual General Meetings held :

i) 86th Annual General Meeting July 21, 2006 : 11.00 AM Tilak Smarak Mandir, Tilak Road, Pune - 411 030.

Special resolutions passed:

— Reappointment of Mr. Vikram S. Kirloskar as Executive Director for a period of five years with effect from June 6, 2006

— For amendment to Articles of Association in accordance with the model regulations prescribed by the National Stock Exchange of India Limited (NSE), in order to list Company's equity shares on NSE.

— For approval of shareholders for payment of commission to non-executive directors for five financial years from April 1, 2005.

— For approval of shareholders for allowing re-imbursement of travelling and other expenses to Mr. M.S. Kirloskar, Non Executive Independent director, as per the provisions of Corporate Governance.

— For approval of shareholders for issuing shares under Employee Stock Option Scheme.

ii) 87th Annual General Meeting July 20, 2007 : 11.00 AM Tilak Smarak Mandir, Tilak Road, Pune - 411 030.

Special resolutions passed:

— For approval of shareholders for issuing shares under Employee Stock Option Scheme to employees and Directors of the company.

— For approval of shareholders for issuing shares under Employee Stock Option Scheme to employees and Directors of the subsidiaries.

iii) 88th Annual General Meeting July 18, 2008 : 11.00 AM Tilak Smarak Mandir, Tilak Road, Pune - 411 030.

Special resolutions passed:

— For approval of shareholders for holding and continue to hold an office or place of profit in the Company as General Manager - Corporate Marketing by Mr. Alok Kirloskar, son of Mr. Sanjay C. Kirloskar, Chairman and Managing Director of the Company.

— For approval of shareholders for increase in remuneration package for Mr. Alok Kirloskar, as General Manager - Corporate Marketing.

In the last year, no special resolution has been passed through Postal Ballot.

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9. Disclosures :

i. Disclosures on materially significant related party transactions i.e. transactions of the Company of material nature, with its promoters, directors or the management, their subsidiaries or relatives etc. that may have potential conflict with the interests of the Company at large.

There are no materially significant transactions made by the Company with its promoters, directors or the management, their subsidiaries or relatives etc. which have potential conflict with the interest of the Company at large.

ii. Details of non compliance by the Company, penalties and strictures imposed on the Company by Stock Exchange or SEBI or any statutory authority on any matter related to capital markets, during the last three years.

None

iii. Whistle Blower Policy and Policy for prevention of sexual harassment at work.

The company has formulated and implemented the Whistle Blower Policy ("the Policy") during the last financial year. This would inter alia provide a mechanism for employees of the Company and other persons dealing with the Company to report to the Chairman of the Audit and Finance Committee; any instance of unethical behaviour, actual or suspected fraud or violation of the Company's code of conduct. Thus any employee has access to the Audit and Finance Committee.

The Policy has been communicated to all the Employees of the Company and other persons dealing with the Company, through circular/display on the Notice Board/ display on the Intranet. The policy has also been uploaded on the company website.

Policy for prevention of sexual harassment at work :

The company has also formulated and implemented the Policy for prevention of sexual harassment at work during the last financial year. This would inter alia provide a mechanism to prevent or deter the commission of acts of Sexual Harassment or inappropriate behaviour at work and to ensure that all employees are treated with respect and dignity. Under the said policy, the procedures for the resolution, settlement or prosecution of acts or instances of Sexual Harassment have also been provided for.

iv. All mandatory requirements of Clause 49 of the Listing Agreement have been complied with by the Company and the extent of adoption of non-mandatory requirements is given hereunder.

Non-Mandatory requirements :

The Board -

The Company has Executive Chairman and the office with required facilities is provided and maintained at the Company's expenses for use by the Chairman.

No policy has been fixed on tenure of Independent Directors.

Remuneration Committee -

Committee is already in place and complying with related non-mandatory requirements.

Shareholders' Rights -

The half-yearly financial results are published in the English and Vernacular newspapers and are also displayed on the Company's website and also have been separately circulated to the shareholders, since half year ended September, 2007.

Audit qualifications -

The Company is already in the regime of unqualified financial statements.

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Training of Board Members -

The present Board of Directors is already comprised of well experienced and responsible members of the society and they themselves have represented as faculties to many training institutes.

Mechanism for evaluating Non-executive Board Members -

No specific mechanism is in place in the Company.

Whistle Blower Policy -

The Company has a Whistle Blower Policy. It inter alia provides a mechanism for employees of the Company and other persons dealing with the Company to report to the Chairman of the Audit and Finance Committee; any instance of unethical behaviour, actual or suspected fraud or violation of the Company's code of conduct. It also provides for adequate safeguards against victimisation of such employees. Further, the existence of the mechanism has been appropriately communicated within the organisation.

10. Means of Communication :

— Half yearly reports to each household of shareholders -

The results of the Company are published in national and regional newspapers. The half yearly financial results have been separately circulated to each household of shareholders, since half year ended September, 2007.

— Quarterly results -

The quarterly results are generally published in the newspapers viz. Indian Express, Loksatta, Economic Times, Times of India, Maharashtra Times and The Hindu - Business Line. These are also displayed on the Company's website 'www.kbl.co.in' shortly after its submission to the Stock Exchanges. The Company's website also displays official news releases.

— Presentation to Institutional Investors or to analysts -

A presentation was made to analysts on August 2, 2008. The said presentation was forwarded to Bombay Stock Exchange and National Stock Exchange and uploaded on the Company's website.

Whether the Management Discussion and Analysis Report is a part of Annual Report or not?

The Management Discussion and Analysis Report is a part of the Annual Report.

11. General Shareholder information :

th89 Annual General Meeting

Day & Date : Friday, July 17, 2009

Time : 11.00 A.M.

Venue : "Yamuna" Survey No.98 (3-7) Baner, Pune - 411 045

Financial Year : 1st April to 31st March

Dates of book closure : Saturday, July 4, 2009 to Friday, July 17, 2009 (Both days inclusive)

Dividend payment date : On or after July 31, 2009, subject to shareholders' approval

Listing on Stock Exchanges : The Company's equity shares are listed on Bombay Stock Exchange Limited and National Stock Exchange of India Limited, Mumbai

Listing fees payment : The Annual Listing fees have been paid and there is no outstanding payment towards the stock exchanges, as on date

Stock codes / Symbol : Bombay Stock Exchange Limited - 500241National Stock Exchange of India Limited - KBL - EQ

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Market Price data :

Performance in comparison to broad based indices - BSE sensex :

Performance in comparison to broad based indices - NSE S&P CNX Nifty :

M o n t h Quotations on B S E Quotations on N S E

High (Rs.) Low (Rs.) High (Rs.) Low (Rs.)

April 2008 329.85 222.00 329.00 223.05

May 2008 292.65 226.90 289.95 226.00

June 2008 233.00 171.10 245.00 184.00

July 2008 211.00 145.60 211.90 145.35

August 2008 177.00 140.00 179.80 138.00

September 2008 152.20 110.00 150.00 110.00

October 2008 127.00 69.00 126.00 69.00

November 2008 130.00 71.50 130.00 71.15

December 2008 91.65 72.50 93.00 72.65

January 2009 87.95 59.00 89.00 60.25

February 2009 82.65 67.25 82.90 64.00

March 2009 89.00 66.00 89.80 65.35

KIRLOSKAR BROTHERS LIMITEDth

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Registrar and Transfer Agent :

The Company appointed Intime Spectrum Registry Limited, as its Registrar and Transfer Agent (R & T Agent) with effect from April 1, 2003. The name of the R & T Agent has been changed to "Link Intime India Private Limited" with effect from January 6, 2009, consequent to acquisition of stake in the Intime Spectrum by Link Market Services Group Pty Limited, Sydney, Australia. Share Transfers, dematerialisation of shares, dividend payment and all other investor related activities are attended and processed at the office of the Registrar and Transfer Agent at the following address:-

Link Intime India Private Limited, (Unit: Kirloskar Brothers Limited), Block No. 202, 2nd Floor, Akshay Complex, Near Ganesh Temple, Off Dhole Patil Road, Pune - 411 001 Tel. No. (020) 26053503 Fax No. (020) 26051629 E.mail : [email protected]

Share transfer system :

The authority to approve transfer of shares upto 10000 shares has been delegated to the Company Secretary and Deputy Company Secretary. The proposals for transfer of shares above 10000 shares are placed before the Investors' Grievance Committee/Board. The share transfers received are processed within 15 days from the date of receipt subject to the transfer instrument being valid and complete in all respects. In compliance with the Listing guidelines, every six months, a practising Company Secretary audits the system of transfer and a certificate to that effect is issued.

Out of total paid-up share capital, 91.43% share capital is held in dematerialised form with National Securities Depository Limited and Central Depository Services (India) Limited as on March 31, 2009.

The Company has established connectivity with both the Depositories through the Registrar, Link Intime India Private Limited.

Members are advised to notify to the Company or Registrar and Transfer Agent, any change of address, immediately.

For the benefit of members, certain information, procedures and forms, which are being asked for by the members frequently, viz. Letter about change of address, ECS form, Nomination Form, Indemnity/Affidavit etc. for issue of duplicate certificates, Transmission form, application for obtaining sub-divided shares of Rs. 2/- each alongwith general FAQs etc. are uploaded on the Company's website www.kbl.co.in under section "Information for Shareholders".

Distribution of Shareholding as on March 31, 2009 :

Nominal value of shares (In Rupees) holders holders (In Rupees) face value

From To

1 5000 16704 91.07 12553830 5.93

5001 10000 852 4.65 5992692 2.83

10001 20000 444 2.42 6106352 2.89

20001 30000 126 0.69 3022746 1.43

30001 40000 50 0.27 1730440 0.82

40001 50000 24 0.13 1053360 0.50

50001 100000 65 0.35 4366954 2.06

100001 Above 77 0.42 176702336 83.54

TOTAL 18342 100.00 211528710 100.00

Number of % to total Total face value % to total

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Shareholding Pattern as on March 31, 2009 :

Plant locations :

Investor Contacts :

Sr. No. Category No. of shares % of shareholding

1 Promoters' Holding*

Indian Promoters 1428229 1.35

Bodies Corporate 64487357 60.97

2 Non Promoters' Holding

Mutual Funds 6574921 6.22

Financial Institutions / Banks 142222 0.13

Insurance Companies 5404836 5.11

Foreign Institutional Investors 2048623 1.94

Private Corporate Bodies 4718290 4.46

Indian Public 20709722 19.59

Non Resident Indians 250155 0.23

TOTAL 105764355 100.00

*Out of Promoter's holding, no share has been pledged by the Promoters or persons under Promoter Group.

Outstanding GDRs/ ADRs / warrants or any convertible instruments etc. :

As of date, the Company has not issued these types of Securities.

1. KirloskarvadiKirloskarvadi - 416 308.Dist. Sangli.Tel No. (02346) 222301 - 05

3. ShirvalGat No. 117, Shindevadi, Tal. Khandala,Dist. Satara - 412 801.Tel No. (02169) 244360 / 244370 /244322

2. Dewas Opposite Railway Station, Ujjain Road, Dewas - 455 001.Tel No. (07272) 227302 -04

4. KondhapuriGat No. 252/2 + 254/2,Kondhapuri,Tal : Shirur, Dist. Pune - 412 208.Tel No. (02137) 270217 / 270116 /270140

Company Address :Secretarial Department,Kirloskar Brothers Limited,"Yamuna", Survey No. 98 (3-7)Baner, Pune - 411 045Tel. No. (020) 27211030Fax No. (020) 27211136Email : [email protected]@kbl.co.in

Addresses of stock exchanges :Bombay Stock Exchange LimitedPhiroze Jeejeebhoy Towers, Dalal Street, Mumbai - 400 001 Tel. No. (022) 2272 1233Fax No. (022) 2272 2061

Depositories for equity shares :National Securities Depository LimitedTrade World - A Wing, Kamala Mills CompoundLower Parel, Mumbai - 400 013Tel. No. (022) 2499 4200Fax No. (022) 2497 2993 / 6351

Registrar and Transfer Agent :Link Intime India Private Limited,(Unit: Kirloskar Brothers Limited),Block No. 202, 2nd Floor, Akshay Complex,Near Ganesh Temple, Off Dhole Patil Road,Pune - 411 001Tel. No. (020) 26053503Fax No. (020) 26051629E.mail : [email protected]

National Stock Exchange of India Limited,Exchange Plaza, Bandra-Kurla Complex,Bandra (East)Mumbai - 400 051Tel. No. (022) 2659 8236Fax No. (022) 2659 8237

Central Depository Services (India) Ltd.Phiroze Jeejeebhoy Towers,16th Floor, Dalal StreetMumbai - 400 001Tel. No. (022) 2272 3333Fax No. (022) 2272 3199 / 2072

KIRLOSKAR BROTHERS LIMITEDth

47

Page 50: Annual Report 2008-09

DECLARATION FOR COMPLIANCE WITH CODE OF CONDUCT

To the members of KIRLOSKAR BROTHERS LIMITED Pursuant to Clause 49 I (D) (ii) of the Listing Agreement, I hereby declare that all Board members and senior management personnel are aware of the provisions of the Code of Conduct laid down by the Board and made effective from April 1, 2005. All Board members and senior management personnel have affirmed compliance with the code of Conduct.

For Kirloskar Brothers Limited

Sanjay KirloskarChairman and Managing DirectorPune : June 2, 2009

CERTIFICATE

To the members of KIRLOSKAR BROTHERS LIMITEDWe have examined the compliance of conditions of Corporate Governance by KIRLOSKAR BROTHERS LIMITED for the year ended on March 31, 2009, as stipulated in clause 49 of the Listing Agreement of the said company with stock exchanges.

The compliance of conditions of Corporate Governance is the responsibility of the management. Our examination was limited to procedures and implementation thereof, adopted by the company for ensuring the compliance of the conditions of the Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the company.

In our opinion and to the best of our information and according to the explanations given to us, we certify that the company has complied with the conditions of Corporate Governance as stipulated in the above-mentioned Listing Agreement.

We further state that such compliance is neither an assurance as to the future viability of the company nor the efficiency or effectiveness with which the management has conducted the affairs of the company.

For M/s P. G. BHAGWATChartered Accountants

Pankaja BhagwatPartner

Membership No. Pune : June 2, 2009 86155

The constituents of 'Group' as prescribed in Regulation 3(1)(e)(i) of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 comprises Better Value Holdings Private Limited, Kirloskar Oil Engines Limited, Kirloskar Engines India Limited, Kirloskar Pneumatic Company Limited, Kirloskar Ferrous Industries Limited, Pooja Credits Private Limited, Kirloskar Silk Industries Limited, Kirloskar Constructions and Engineers Limited, Gondwana Engineers Limited, The Kolhapur Steel Limited, Kirloskar Corrocoat Private Limited, Kirloskar Systems Limited, Asara Sales & Investments Private Limited, Cees Investments and Consultants Private Limited, Navsai Investments Private Limited, Prakar Investments Private Limited, Alpak Investments Private Limited, Achyut & Neeta Holdings & Finance Private Limited, SriHarihareshwara Finance & Investments Private Limited, VikramGeet Investments and Holdings Private Limited, Kirloskar Integrated Technologies Limited (Formerly known as Kirloskar Kisan Equipments Limited), Kothrud Power Equipment Limited, Koppal Mines & Minerals Private Limited, Kirloskar Proprietary Limited, G. G. Dandekar Machine Works Limited, Mahila Udyog Limited, Kirloskar Chillers Private Limited, Hematic Motors Private Limited, Pressmatic Electro Stampings Private Limited, Quadromatic Engineering Private Limited, Suman Kirloskar, Mrinalini Kirloskar, Neeta A. Kulkarni, Atul C. Kirloskar, Arti Kirloskar, Gauri Kirloskar, Aditi Kirloskar, Sanjay C. Kirloskar, Pratima Kirloskar, Alok Kirloskar, Rama Kirloskar, Rahul C. Kirloskar, Alpana Kirloskar, Alika Kirloskar, Aman Kirloskar, Gautam A. Kulkarni, Jyotsna Kulkarni, Nihal Kulkarni, Shruti Kulkarni, Ambar Kulkarni, Komal Kulkarni, Vikram S. Kirloskar, Geetanjali Kirloskar, Manasi Kirloskar, Roopa Gupta and Chandrashekhar H. Naniwadekar.

48

Page 51: Annual Report 2008-09

AUDITORS' REPORT TO THE MEMBERS OF KIRLOSKAR BROTHERS LIMITED

1. We have audited the attached balance sheet of Kirloskar Brothers Limited as at 31st March, 2009, the profit and loss account and also the cash flow statement of the company for the year ended on that date, annexed thereto. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor's Report) Order, 2003 [as amended by Companies (Auditor's Report) (Amendment) Order, 2004] issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956, we enclose in the annexure a statement on the matters specified in paragraph 4 and 5 of the said order.

4. Further to our comments in the annexure referred to in paragraph 3 above, we report that:

(i) we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit;

(ii) in our opinion proper books of account as required by law have been kept by the company so far as appears from our examination of those books;

(iii) the balance sheet, the profit and loss account and cash flow statement dealt with by this report are in agreement with the books of account;

(iv) in our opinion, the balance sheet, profit and loss account and cash flow statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956;

(v) on the basis of the written representations received from the directors as on 31st March, 2009, and taken on record by the board of directors, we report that none of the directors is disqualified as on 31st March, 2009 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956;

(vi) in our opinion and to the best of our information and according to the explanations given to us, the accounts, read together with the notes thereon, give the information required by the Companies Act, 1956 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(a) in the case of the balance sheet, of the state of affairs of the company as at 31st March, 2009 ;

(b) in the case of the profit and loss account of the profit for the year ended on that date;

(c) in the case of the cash flow statement, of the cash flows for the year ended on that date.

For M/s P. G. BHAGWAT Chartered Accountants

Pankaja BhagwatPartner

Membership No.: Pune : April 30, 2009

86155

KIRLOSKAR BROTHERS LIMITEDth

49

Page 52: Annual Report 2008-09

ANNEXURE Re: Kirloskar Brothers LimitedReferred to in paragraph 3 of our report of even date

(i) (a) The company has maintained proper records showing full particulars including quantitative details and situation of fixed assets.

(b) The fixed assets have been physically verified by the management at reasonable intervals. According to information and explanation given to us, no material discrepancies were noticed on such verification.

(c) The fixed assets, which were disposed off during the year, do not form substantial part of the fixed assets owned by the company.

(ii) (a) The inventory was physically verified during the year by the management. In our opinion, the frequency of verification is reasonable.

(b) The procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the company and the nature of its business.

(c) The company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and the book records were not material.

(iii) (a) The company has not granted any loans secured or unsecured to companies, firms or other parties covered in the register maintained as per section 301 of the Companies Act, 1956.

Accordingly, the provisions of clause 4 (iii) (b) (c) and (d) are not applicable to the company.

(b) The company has not taken any loans, secured or unsecured from companies, firms or other parties covered in the register maintained as per section 301 of the Companies Act, 1956.

Accordingly, the provisions of clause 4 (iii) (f) and (g) are not applicable to the company.

(iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the company and the nature of its business with regard to purchase of inventory and fixed assets and for the sale of goods and services. During the course of audit we have not observed any continuing failure to correct major weaknesses in internal control system.

(v) (a) According to the information and explanations given to us, the particulars of contracts or arrangements referred to in Section 301 of the Companies Act, 1956 have been entered in the register to be maintained under that section.

(b) According to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangements have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

(vi) In our opinion and according to the information and explanations given to us, the company has complied with the directives issued by the Reserve Bank of India and the provisions of section 58A, 58AA or any other relevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 with regard to the deposits accepted from the public. As informed to us, no order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal.

(vii) In our opinion, the company has an internal audit system commensurate with the size and nature of its business.

(viii) We have broadly reviewed the books of account relating to materials, labour and other items of cost maintained by the company pursuant to the rules made by the Central Government for the maintenance of cost records under section 209 (1) (d) of the Companies Act, 1956 and we are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have not however made a detailed examination of records with a view to determine whether they are accurate and complete.

(ix) (a) The company is regular in depositing with appropriate authorities undisputed statutory dues including provident fund, investor education and protection fund, employees' state insurance, income tax, sales tax, wealth tax, service tax, custom duty, excise duty, cess and other material statutory dues applicable to it.

According to information and explanation given to us, no undisputed amounts payable in respect of statutory dues were in arrears, as at 31st March, 2009 for a period of more than six months from the date they became payable.

(b) According to information and explanation given to us, there are no dues of income tax, sales tax, wealth tax, service tax, custom

duty, excise duty and cess which have not been deposited on account of any dispute other than those mentioned in the Appendix to this report.

(x) The company has no accumulated losses as at 31st March, 2009. The company has not incurred cash losses during the financial year and in the immediately preceding financial year.

(xi) In our opinion and according to information and explanations given to us, the company has not defaulted in repayment of dues to a

financial institution or bank. The company has no debenture holders.

(xii) According to information and explanation given to us, the company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities. Accordingly, the provisions of clause 4 (xii) of the Companies (Auditor's Report) Order, 2003 are not applicable to the company.

(xiii) In our opinion, the company is not a chit fund or a nidhi/mutual benefit fund/society. Accordingly, the provisions of clause 4 (xiii) of the Companies (Auditor's Report) Order, 2003 are not applicable to the company.

50

Page 53: Annual Report 2008-09

KIRLOSKAR BROTHERS LIMITED

(xiv) According to information and explanation given to us, the company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4 (xiv) of the Companies (Auditor's Report) Order, 2003 are not applicable to the company.

(xv) In our opinion, the terms and conditions on which the company has given guarantees for loans taken by others from banks or financial institutions are not prejudicial to the interest of the company.

(xvi) In our opinion, the term loans have been applied for the purpose for which they were raised.

(xvii) According to information and explanation given to us, we report that no funds raised on short-term basis have been used for long-term investment.

(xviii) According to information and explanation given to us, the company has not made any preferential allotment of any shares to parties

and companies covered under section 301 of the Companies Act, 1956.

(xix) According to information and explanation given to us, the company has not issued any debentures. Accordingly, the provisions of clause 4 (xix) of the Companies (Auditor's Report) Order, 2003 are not applicable to the company.

(xx) According to information and explanation given to us, the company has not made any public issue to raise money. Accordingly, the provisions of clause 4 (xx) of the Companies (Auditor's Report) Order, 2003 are not applicable to the company.

(xxi) According to information and explanation given to us, no fraud on or by the company has been noticed or reported during the course of our audit.

Pankaja Bhagwat

86155

For M/S P. G. BHAGWAT Chartered Accountants

Partner

Membership No.: Pune : April 30, 2009.

th

Appendix (Referred to in clause (ix) (b) of the Annexure to the Auditor's Report)

Sr. Name of the Statue Nature of Dues Rs. in Forum where dispute is

Million

1 Central Sales Tax Act Sales Tax 0.24

25.29 Additional Deputy Commissioner

0.69 Assistant Commissioner, MP

0.41 State High Court

2 Sales Tax acts of various states Sales Tax 0.01 Commercial Tax Officer, Corporate Charge

0.05 Sales Tax Appellate

4.91 Assistant Commissioner

0.62 Deputy Commissioner

0.17 Sales Tax Officer , Kochi

0.81 Additional Deputy Commissioner

1.85 Bangalore Tribunal

1.55 A.P Tribunal

52.45 State High Court

3 Central Excise Act Excise Duty 13.22 Joint/Assistant Commissioner( Central Commissioner)

1.13 Delhi Tribunal

4 The Income Tax Act 1961 Income Tax 395.32 Commissioner of Income Tax Appeals

pending

Additional Commissioner, Bhopal

51

Page 54: Annual Report 2008-09

BALANCE SHEET AS AT MARCH 31, 2009

Schedule 2009 2008 Rupees Rupees

SOURCES OF FUNDS :

Shareholders' FundsCapital 1 211,528,710 211,528,710

Reserves and Surplus 2 6,787,799,285 6,364,990,702

Employee Stock Options outstandings 121,855,582 133,004,975 Less : Deferred employee compensation expense 29,787,458 88,970,333

92,068,124 44,034,642 7,091,396,119 6,620,554,054

Loan FundsSecured Loans 3 1,808,661,549 1,566,515,302 Unsecured Loans 4 1,395,682,632 345,522,632

3,204,344,181 1,912,037,934 Deferred Tax-net 5 65,086,267 78,169,689

Total 10,360,826,567 8,610,761,677 APPLICATION OF FUNDS :

Fixed Assets 6Gross Block 3,349,492,805 2,743,820,288 Less: Depreciation 1,298,156,225 1,124,758,974 Net Block 2,051,336,580 1,619,061,314 Capital work-in-progress including capital advances 704,733,584 322,356,492

2,756,070,164 1,941,417,806

Intangible Assets 7 Gross Block 87,657,961 83,947,687 Less: Amortization 77,713,190 70,103,508 Net Block 9,944,771 13,844,179

Investments 8 3,383,750,571 3,472,947,307 Current Assets, Loans & AdvancesInventories 9 1,556,655,133 1,329,886,084 Gross amount due from customers for project related contract work 10 2,244,317,546 1,914,974,553 Sundry debtors 11 6,126,484,258 4,524,684,338 Cash and bank balances 12 99,949,039 758,728,757 Other current assets 13 437,059,763 309,233,630 Loans and advances 14 3,238,063,251 2,282,949,364

13,702,528,990 11,120,456,726 Less: Current Liabilities & ProvisionsCurrent Liabilities 15 8,292,534,699 6,891,251,926 Gross amount due to customers for project related contract work 16 681,146,885 324,612,815 Provisions 17 517,786,345 722,039,600

9,491,467,929 7,937,904,341 Net Current Assets 4,211,061,061 3,182,552,385

Total 10,360,826,567 8,610,761,677 Notes to Accounts 25

The schedules referred to above and the notes to accounts form an integral part of the Balance Sheet

As per our report of even date attached For and on behalf of the Board of Directors

For M/s P.G. BhagwatChartered Accountants SANJAY KIRLOSKAR S. N. INAMDAR

Chairman & Managing Director Director

G. P. KULKARNI A. R. SATHE Partner Company Secretary Vice President (Finance)

PUNE : April 30, 2009 PUNE : April 30, 2009

PANKAJA BHAGWAT

52

Page 55: Annual Report 2008-09

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2009

Schedule 2009 2008

Rupees Rupees

INCOME

Sales 18 18,309,447,980 15,251,461,446

Other income 19 359,135,347 429,536,631

Total 18,668,583,327 15,680,998,077

EXPENDITURE

Materials consumed 20 13,926,768,676 11,125,807,554

Payments and benefits to employees 21 943,816,573 850,505,163

Operating and other expenses 22 2,310,171,677 1,856,670,285

Interest 23 303,200,468 168,854,653

Depreciation and amortization 207,350,133 182,088,160

17,691,307,527 14,183,925,815

Less: Expenses capitalized 4,927,376 3,333,861

Total 17,686,380,151 14,180,591,954

Profit/(Loss) before tax 982,203,176 1,500,406,123

Provision for tax 24 311,916,578 399,039,651

Profit/(Loss) after tax 670,286,598 1,101,366,472

Balance brought forward from previous year 506,879,134 600,468,691

Profit available for appropriation 1,177,165,732 1,701,835,163

Appropriations

Proposed dividend 211,528,710 423,057,420

Additional tax on dividend 35,949,305 71,898,609

Transfer to General Reserve 400,000,000 700,000,000

Surplus carried to Balance Sheet 529,687,717 506,879,134

1,177,165,732 1,701,835,163

Basic Earning per Equity Share (Refer Note No.12) 6.34 10.41

Diluted Earning per Equity Share (Refer Note No.12) 6.34 10.39

Notes to Accounts 25

The schedules referred to above and the notes to accounts form an integral part of the Profit and Loss Account

As per our report of even date attached For and on behalf of the Board of Directors

For M/s P.G. BhagwatChartered Accountants SANJAY KIRLOSKAR S. N. INAMDAR

Chairman & Managing Director Director

G. P. KULKARNI A. R. SATHE Partner Company Secretary Vice President (Finance)

PUNE : April 30, 2009 PUNE : April 30, 2009

PANKAJA BHAGWAT

KIRLOSKAR BROTHERS LIMITEDth

53

Page 56: Annual Report 2008-09

CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2009

2009 2008

Rupees Rupees

A. Cash flow from operating activities

Net profit before taxation and extraordinary items 982,203,176 1,500,406,123

Adjustments for

Depreciation and amortization 207,350,133 182,088,160

(Profit) / loss on sale of fixed assets (983,694) (3,954,533)

Employees Stock Option - Compensation

debited to Profit and Loss Account ( Net ) 48,033,482 44,034,642

Provision for doubtful debts and advances 70,609,776 18,549,702

Interest income (101,943,584) (113,036,296)

Dividend income (145,191,738) (168,772,378)

Interest expenses 303,200,468 168,854,653

Operating profits before working capital changes 1,363,278,019 1,628,170,073

(Increase) /decrease in trade and other receivables (2,487,101,162) (2,085,180,571)

(Increase) /decrease in inventories (226,769,049) (459,073,762)

Increase/(decrease) in sundry creditors 1,788,333,088 1,805,804,977

Cash generated from operations 437,740,896 889,720,717

Income tax (paid) /refunded (292,878,843) (410,223,674)

Net cash from operating activities 144,862,053 479,497,043

B. Cash flow from investing activities

Purchase of fixed assets (1,022,765,402) (498,521,559)

Proceeds from sale of fixed assets 5,646,013 7,689,416

(Purchase) /Sale of investments 89,196,736 (95,966,717)

Interest received 104,210,047 111,859,096

Dividend received 141,577,338 168,370,778

Advance to subsidiaries (628,364,767) (16,678,639)

Net cash from investing activities (1,310,500,035) (323,247,625)

C. Cash flow from financing activities

(Repayment) / proceeds of / from long term borrowings (net) 676,705,456 70,336,072

(Repayment) / proceeds of / from other borrowings (net) 615,600,791 433,048,779

Interest paid (298,642,337) (151,718,631)

Dividend paid (414,907,037) (208,045,196)

Tax on dividend paid (71,898,609) (35,949,304)

Net cash used in financing activities 506,858,264 107,671,720

Net increase in cash and cash equivalents (658,779,718) 263,921,138

Cash and cash equivalents at the beginning of the year 758,728,757 494,807,619

Cash and cash equivalents at the end of the year 99,949,039 758,728,757

As per our report of even date attached For and on behalf of the Board of Directors

For M/s P.G. BhagwatChartered Accountants SANJAY KIRLOSKAR S. N. INAMDAR

Chairman & Managing Director Director

G. P. KULKARNI A. R. SATHE Partner Company Secretary Vice President (Finance)

PUNE : April 30, 2009 PUNE : April 30, 2009

PANKAJA BHAGWAT

54

Page 57: Annual Report 2008-09

SCHEDULE TO THE ACCOUNTS

2009 2008Rupees Rupees

SCHEDULE 1 : SHARE CAPITAL

Authorized

250,000,000 ( 250,000,000 ) equity shares of Rs.2/- (Rs.2/-) each 500,000,000 500,000,000

500,000,000 500,000,000

Issued

105,907,030 ( 105,907,030 ) equity shares of Rs.2/- (Rs.2/-) each 211,814,060 211,814,060

Subscribed and paid up

105,764,355 ( 105,764,355) equity shares of Rs.2/- (Rs.2/-) each 211,528,710 211,528,710

Out of the above

( i ) 165,000 (165,000) equity shares of Rs.2/- (Rs.2/-) each

were allotted as fully paid up pursuant to contract for

consideration other than cash.

( ii ) 88,499,975 (88,499,975) shares of Rs.2/- (Rs.2/-) each

were allotted as fully paid up bonus shares by

capitalisation of General Reserve and Share Premium

( iii ) 53,207,342 (52,694,805) shares of Rs.2/- (Rs.2/-) each

are held by Better Value Holdings Pvt. Limited,

the holding company. 211,528,710 211,528,710

SCHEDULE 2 : RESERVES AND SURPLUS

Capital Reserve 172,443 172,443

Capital Redemption Reserve 4,000,000 4,000,000

Share Premium Account 395,881,752 395,881,752

General Reserve

Balance as per last account 5,458,057,373 4,808,203,160

Less : Liabilities on account of Employee Benefits - 50,145,787

(Net of Deferred Tax) [Refer note No B -16 ]

Add: Transfer from Profit and Loss Account 400,000,000 700,000,000

5,858,057,373 5,458,057,373

Profit and Loss Account 529,687,717 506,879,134

6,787,799,285 6,364,990,702

KIRLOSKAR BROTHERS LIMITEDth

55

Page 58: Annual Report 2008-09

SCHEDULE TO THE ACCOUNTS (CONTD.)2009 2008

Rupees Rupees

SCHEDULE 3 : SECURED LOANS

Loans and advances from banks

Cash / Export Credit facilities 1,663,207,001 1,047,606,210

[Secured by hypothecation of tangible movable assets

and book debts of the Company]

Other loans and advances

From Exim Bank 145,454,548 518,909,092

[Secured by way of hypothecation of movable

fixed assets and mortgage of immovable

properties of the Company (both present and future)]

1,808,661,549 1,566,515,302

SCHEDULE 4 : UNSECURED LOANS

Interest free loan under Sales Tax Deferral Scheme 55,462,632 55,462,632

Inter Corporate Deposits 40,000,000 50,000,000

Short term Loans and advances

a) Packing Credit in Foreign Currency from CitiBank N.A. 230,220,000 240,060,000

b) from Bank of India 670,000,000 -

c) from Calyon Bank 400,000,000 -

1,395,682,632 345,522,632

SCHEDULE 5 : DEFERRED TAX-NET

Deferred Tax Liabilities

On depreciation/amortization of fixed assets 165,499,236 152,759,957

165,499,236 152,759,957

Deferred tax assets

On employees voluntary retirement schemes 441,770 5,697,416

On provision for doubtful debts/advances 47,465,723 23,465,461

Provision for employee benefits 50,669,592 43,365,117

Other timing differences 1,835,884 2,062,274

100,412,969 74,590,268

65,086,267 78,169,689

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Page 59: Annual Report 2008-09

SCHEDULE 6 : FIXED ASSETS Rupees

Land Free/ Buildings Railway Plant & Furniture & Vehicles Total Previous

Lease Hold Siding Machinery Fittings Year

Gross Block

At 01.04.2008

Additions

Deductions

At 31.03.2009

Depreciation/

Amortization

At 01.04.2008

For the year

Recouped

At 31.03.2009

Net Block

At 31.03.2009

Assets under Erections

including capital advances

At 31.03.2009

At 31.03.2008

Note: Building includes cost of hangars jointly owned with other companies

2009 2008

Rupees Rupees

SCHEDULE 7: INTANGIBLE ASSETS - COMPUTER SOFTWARE

Gross Block

At 01.04.2008 83,947,687 73,732,447

Additions 3,710,274 10,215,240

Deductions - -

At 31.03.2009 87,657,961 83,947,687

Amortization

At 01.04.2008 70,103,508 61,333,485

For the year 7,609,682 8,770,023

Recouped - -

At 31.03.2009 77,713,190 70,103,508

Net Block At 31.03.2009 9,944,771 13,844,179

209,902,536 342,221,361 1,483,851 2,072,371,805 68,638,429 49,202,306 2,743,820,288 2,393,775,293

- 279,769,216 52,474 334,106,789 12,629,934 10,119,623 636,678,036 372,856,799

- 991,247 - 21,927,159 2,018,259 6,068,854 31,005,519 22,811,804

209,902,536 620,999,330 1,536,325 2,384,551,435 79,250,104 53,253,075 3,349,492,805 2,743,820,288

- 76,260,583 1,393,887 991,626,369 32,354,525 23,123,610 1,124,758,974 970,517,758

- 9,960,920 30,943 180,456,692 4,951,203 4,340,693 199,740,451 173,318,137

- 692,662 - 20,782,768 1,267,452 3,600,318 26,343,200 19,076,921

- 85,528,841 1,424,830 1,151,300,293 36,038,276 23,863,985 1,298,156,225 1,124,758,974

209,902,536 535,470,489 111,495 1,233,251,142 43,211,828 29,389,090 2,051,336,580 1,619,061,314

704,733,584 322,356,492

209,902,536 535,470,489 111,495 1,233,251,142 43,211,828 29,389,090 2,756,070,164 1,941,417,806

209,902,536 265,960,778 89,964 1,080,745,436 36,283,904 26,078,696 1,619,061,314

SCHEDULE TO THE ACCOUNTS (CONTD.)

KIRLOSKAR BROTHERS LIMITEDth

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Rupees RupeesSCHEDULE 8 : INVESTMENTS

Long Term Investments (At cost)

A. Trade Quoted73,903,270 (73,903,270) equity shares of Rs.2/- each in Kirloskar Oil Engines Limited 404,980,851 404,980,851

4,547,254 (4,547,254) equity shares of Rs. 10/- each in Kirloskar Pneumatic Company Ltd. 125,655,633 125,655,633

530,636,484 530,636,484 Unquoted 2 (2) equity share of Rs.100/- each in Kirloskar

Proprietary Ltd., a company under same management 200 200

1,272 (1,272) ordinary shares of K. Sh. 1,000/- each in Kirloskar Kenya Ltd. 850,662 850,662

225,000 (225,000) equity shares of Rs. 10/- each in Kirloskar Ebara Pumps Ltd. 2,747,272 2,747,272

112,500 (112,500) equity shares of Singapore $ 1/- each in Kirsons Trading Pte Ltd. 2,525,731 2,525,731

24,000 (24,000) equity shares of Rs. 10/- each in Quadromatic Engineering Pvt. Ltd., a company under same management. 240,000 240,000

10,472 (10,472) equity shares of Rs. 100/- each in Hematic Motors Pvt. Ltd., a company

under same management. 10,446,862 10,446,862

8,325 (8,325) equity shares of Rs. 100/- each in Pressmatic Electro Stampings Pvt. Ltd., a

company under same management. 4,281,802 4,281,802

2,500,000 (2,500,000 ) equity shares of Rs. 10/- each in Kirloskar Corrocoat Private Limited 25,000,000 25,000,000

46,092,529 46,092,529 B. Other than trade Quoted 400 (400) equity shares of Rs. 10/- each

in Housing Development Finance Corporation Ltd. 9,500 9,500

1,081 (1,081 ) equity shares of Rs. 10/- each in I C I C I Bank Ltd. 100,000 100,000

60,000 (60,000) equity shares of Rs. 5/- each in Kulkarni Power Tools Ltd. 301,500 301,500

411,000 411,000

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Rupees Rupees Unquoted 1 (1) equity share of Rs. 50/- each in

Maharashtra State Co-operative Bank Ltd. 53 53 100 (100) equity shares of Rs. 5,000/- each in Kranti Sahakari Sakhar Karkhana Ltd. 500,000 500,000 2,597,760 (2,597,760) equity shares of Rs.10/- each in Kirloskar Toyoda Textile Machinery Ltd. 26,107,490 26,107,490

26,607,543 26,607,543 C. In Subsidiary Companies Unquoted Fully Paid Up 3,445,477(3,445,477) equity shares of Rs.10/- each

in Pooja Credits Private Ltd. 34,454,770 34,454,770 1,950,000 (1,950,000) equity shares of GBP 1/- each in SPP Pumps Ltd. 149,226,964 149,226,964 2,000,130 (2,000,130) equity shares of Rs. 10/- each in Kirloskar Silk Industries Ltd. 20,001,300 20,001,300 6,150,002 (6,150,002 ) equity shares of Rs. 10/- each in Kirloskar Constructions and Engineers Ltd. 613,300,000 613,300,000 40,160 (40,160) equity shares of Rs. 100/- each in Gondwana Engineers Ltd. 76,360,000 76,360,000 16,311,083 ( - ) equity shares of Rs. 1/- each in The Kolhapur Steel Ltd. 93,843,591 -

Partly Paid up 2,000 (2,000 ) ordinary equity shares of Euro 100/- each

in Kirloskar Brothers International B V (Amount paid per share Euro 70 each) 8,606,717 8,606,717

1,000,000 ( - ) common shares of Baht 10/- each in Kirloskar Brothers (Thailand) Limited

(Amount paid per share Baht 2.5 each) 3,209,673 - 999,003,015 901,949,751

D. Government Securities Unquoted

- (5,500) capital gains bonds 2002 of Rs.10,000/- each of National Housing Bank. - 55,000,000 - (4,375) capital gains bonds of Rs.10,000/- each of National Bank for Agriculture & Rural Development - 43,750,000 - (4,375) Non Convertible Redeemable Taxable Bonds - Series -Vof Rs. 10,000/- each of Rural Electrification Corporation Ltd. - 43,750,000

- (4,375) SIDBI Capital gains Bonds of Rs.10,000/- each of Small Industries Development Bank of India. - 43,750,000

88,000 (88,000 ) Non Convertible Redeemable Taxable Bonds - Series -VI of Rs.10,000/-

each of Rural Electrification Corporation Ltd. 880,000,000 880,000,000 89,000 (89,000 ) Non Convertible Redeemable Taxable Bonds - of Rs.10,000/-

each of National Highways Authority of India. 890,000,000 890,000,000 1,770,000,000 1,956,250,000

E. Other Investment 350,685 (350,685) Units of Rs. 20/- each

of HDFC Group Unit Linked Option Plan B 11,000,000 11,000,0003,383,750,571 3,472,947,307

Aggregate amount of quoted investments 531,047,484 531,047,484 Market value 4,924,683,428 9,857,722,409Aggregate amount of unquoted investments 2,852,703,087 2,941,899,823

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Rupees Rupees

SCHEDULE 9 : INVENTORIES

Raw materials and components 587,376,486 600,846,166

Stores and spares 38,453,275 49,912,003

Work-in-progress 689,028,964 456,663,554

Finished goods 241,796,408 222,464,361

1,556,655,133 1,329,886,084

SCHEDULE 10 : GROSS AMOUNT DUE FROM CUSTOMERS

FOR PROJECT RELATED CONTRACT WORK

Cost incurred plus recognized profits less recognized losses 26,107,504,191 20,963,928,282

Less: Progress billing 23,863,186,645 19,048,953,729

2,244,317,546 1,914,974,553

SCHEDULE 11 : SUNDRY DEBTORS

Debts outstanding for a period exceeding six months

Unsecured, considered good 1,722,506,860 1,283,411,132

Considered doubtful 129,977,452 60,012,654

Other debts

Unsecured, considered good 4,403,977,398 3,241,273,206

6,256,461,710 4,584,696,992

Less: Provision for doubtful debts 129,977,452 60,012,654

6,126,484,258 4,524,684,338

SCHEDULE 12 : CASH AND BANK BALANCES

Cash on hand 934,370 801,431

Balances with schedule banks

On current accounts 92,661,428 593,396,044

On deposit accounts 6,225,000 163,701,056

Balances with other banks

On current accounts 128,241 830,226

99,949,039 758,728,757

Name of other bank Current Maximum account balance

Bank Atlantic - USA 128,241 3,114,363

Previous year (830,226) (2,455,244)

SCHEDULE 13 : OTHER CURRENT ASSETS

Interest accrued on investments 38,985,773 41,252,236

Dividend due from a subsidiary company 4,016,000 401,600

Claims receivable 394,057,990 267,579,794

437,059,763 309,233,630

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Rupees RupeesSCHEDULE 14 : LOANS AND ADVANCES

Unsecured considered good

Advances and loans to subsidiaries 690,047,217 61,682,450

Advances recoverable in cash or kind or for

value to be received 1,934,276,003 1,704,486,244

Considered doubtful 9,668,689 9,023,712

Balances with customs, excise, etc. 850,416 609,999

Deposit with railways, post and others 585,457,423 456,617,322

Advance income tax (net of provision for tax) 27,432,192 59,553,349

3,247,731,940 2,291,973,076

Less: Provision 9,668,689 9,023,712

3,238,063,251 2,282,949,364

SCHEDULE 15 : CURRENT LIABILITIES

Acceptances 81,637,916 92,874,073

Sundry Creditors

(i) Total outstanding dues to Micro Small and Medium

Enterprises (Refer Note no B - 15 ) - -

(ii) Total outstanding dues of other creditors other than

Micro Small and Medium Enterprises 5,837,628,090 4,829,582,362

5,837,628,090 4,829,582,362

Dues to subsidiary companies 218,812,780 25,338,215

Advances and deposits from customers 2,032,953,297 1,842,800,073

Items covered by Investor Education and Protection Fund

(a) Unpaid dividend 44,687,068 36,536,685

(b) Unpaid matured deposits 913,000 1,149,500

Other liabilities 48,378,584 40,005,185

Interest accrued but not due on loans and advances 27,523,964 22,965,833

8,292,534,699 6,891,251,926

SCHEDULE 16 : GROSS AMOUNT DUE TO CUSTOMERS FOR PROJECT RELATED CONTRACT WORK

Progress billing 6,364,273,849 2,481,335,853

Less: Cost incurred plus recognized profits less recognized losses 5,683,126,964 2,156,723,038

681,146,885 324,612,815

SCHEDULE 17: PROVISIONS

Proposed dividend 211,528,710 423,057,420

Additional tax on dividend 35,949,305 71,898,609

Provision for product warranties 31,856,656 28,257,897

Provision for leave encashment 219,193,903 181,826,030

Provision for pension benefits (Ex-employees) 19,257,771 16,999,644

517,786,345 722,039,600

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Rupees RupeesSCHEDULE 18 : SALES AND CONTRACT REVENUE

Sales (Gross) 10,158,965,921 8,579,399,196 Less: Excise duty recovered 577,912,640 588,593,358

9,581,053,281 7,990,805,838Project related revenue 8,728,394,699 7,260,655,608

18,309,447,980 15,251,461,446

SCHEDULE 19 : OTHER INCOME

Income from investments Interest from long term investments

[Tax deducted at source Rs. nil (Rs. nil)] 100,845,915 107,600,729 Dividend income (a) Trade investment 125,903,748 168,294,375 (b) Subsidiaries 19,176,099 401,600

(c) Other investments - long term 111,891 76,403 Other interest received [Tax deducted at source Rs. 284,786/- (Rs.1,127,711/- )] 1,097,669 5,435,567 Profit on sale of fixed assets 3,802,079 6,290,860 Royalty received 1,334,443 2,660,769 House rent 752,868 611,337 Recovery of bad debts 51,449,253 84,798,511 Miscellaneous income 54,661,382 53,366,480

359,135,347 429,536,631

SCHEDULE 20 : MATERIALS CONSUMED

Raw materials consumed 8,817,342,405 7,774,444,593 Stores and spares consumed 372,510,773 341,335,969 Processing charges 295,920,126 174,618,898 Purchase of traded goods 4,692,692,829 3,004,436,415

14,178,466,133 11,294,835,875 (Increase) / Decrease in stocksOpening stock Work-in-progress 456,663,554 291,587,129 Finished goods 222,464,361 218,512,465

679,127,915 510,099,594Closing stock Work-in-progress 689,028,964 456,663,554 Finished goods 241,796,408 222,464,361

930,825,372 679,127,915 (251,697,457) (169,028,321)

13,926,768,676 11,125,807,554 SCHEDULE 21 : PAYMENTS AND BENEFITS TO EMPLOYEES

Salaries, wages and bonus 848,551,428 768,990,409 Payment under Voluntary Retirement Schemes - 490,000 Contribution to provident fund and E.S.I. 43,120,522 40,292,598 Gratuity (11,464,808) (14,116,434)Welfare expenses 59,273,910 58,543,136 Pension benefits 4,335,521 (3,694,546)

943,816,573 850,505,163

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2009 2008

Rupees Rupees

SCHEDULE 22 : OPERATING AND OTHER EXPENSES

Power & fuel 134,006,775 140,032,430

Repairs and maintenance

Plant and machinery 72,670,281 101,134,203

Buildings 35,704,584 39,434,380

Rent 47,467,732 40,175,699

Rates and taxes 8,364,155 7,099,097

Travel and conveyance 236,536,638 213,214,324

Postage and telephone 43,997,577 43,059,628

Insurance 113,391,932 103,774,510

Director's sitting fees 970,000 810,000

Director's remuneration 62,015,136 56,657,533

Royalties and fees 47,987,895 33,488,397

Cash discount 31,074,891 18,168,105

Freight and forwarding charges 205,174,284 156,732,948

Brokerage and commission 264,427,519 206,602,931

Advertisements and publicity 70,427,837 102,952,965

Provision for product warranty 44,854,966 31,991,272

Excise duty paid 15,995,473 34,774,235

Bank charges 129,594,989 101,836,235

Loss on sale/disposal of fixed assets 2,818,385 2,336,327

Bad debts written off 4,288,396 3,492,307

Provision for doubtful debts and advances 70,609,776 18,549,702

Donations 5,249,294 12,862,000

Other miscellaneous expenses 662,543,162 387,491,057

2,310,171,677 1,856,670,285

SCHEDULE 23 : INTEREST

Interest

On fixed loans and debentures 46,403,973 43,254,138

On other loans 256,796,495 125,600,515

303,200,468 168,854,653

SCHEDULE 24 : PROVISION FOR TAX

Income tax for the year

Current 306,000,000 360,000,000

Deferred (13,083,422) 22,939,651

Fringe Benefit Tax 19,000,000 16,100,000

311,916,578 399,039,651

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SCHEDULE 25:

A) SIGNIFICANT ACCOUNTING POLICIES

1 Basis of preparation of financial statements

(Accounting Standards) Rules, 2006 and the relevant provisions of the Companies Act, 1956.

b) The financial statements have been prepared under the historical cost convention on an accrual basis.

c) The accounting policies applied by the Company are consistent with those used in the previous year.

2 Fixed Assets

Fixed assets are stated at cost less accumulated depreciation. Cost comprises the purchase price and any other attributable cost of bringing the asset to its working condition for its intended use. Financing costs relating to acquisition of qualifying fixed assets are also included to the extent they relate to the period till such assets are ready to be put to use.

3 Depreciation

Depreciation on fixed assets has been provided in a manner that amortizes the cost of the assets over their estimated useful lives as detailed below:

a) On assets acquired prior to 01.08.1987, on a straight-line method at the rates determined in the year of acquisition under section 205 (b) of the Companies Act, 1956. No depreciation is provided on assets scrapped or sold during the year.

b) On assets other than patterns, acquired on or after 01.08.1987, on straight line method as per Schedule-XIV to the Companies Act, 1956.

c) On patterns, on straight line method on the basis of estimated useful life as given below:

Sr. Particulars Rate of

No Depreciation

1 Patterns with estimated useful life of less than one year & one time use 100%

2 Patterns with estimated useful life of more than one year but less than eight years. 20%

3 Patterns with estimated useful life of more than eight years. 11.31%

4 Intangible Assets

Computer Software

Computer software is amortized on straight line method over a period of three years.

5 Inventories

a) Inventories are valued at the lower of cost and net realizable value.

b) The cost is calculated on weighted average method.

c) Cost comprises costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

6 Construction Contracts

a) Contract revenue and contract costs arising from fixed price contracts are recognized in accordance with the percentage of completion method.

b) The stage of completion is measured by reference to costs incurred to date as a percentage of total estimated costs for each contract.

c) Full provision is made for any loss in the year in which it is first foreseen.

NOTES FORMING PART OF ACCOUNTS

a) The financial statements have been prepared to comply in all material respects with The Companies

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7 Research and Development

Research and development costs are expensed as incurred, except for development costs which relate to the design and testing of new or improved materials, products or processes which are recognized as an asset to the extent that it is expected that such assets will generate future economic benefits.

8 Revenue Recognition

a) Sale of products and services are recognized when the significant risks and rewards of ownership of the goods have passed to the buyer and when services are rendered.

b) Where the ability to assess the ultimate collection with reasonable certainty is lacking at the time of raising any claim, revenue recognition is postponed to the extent of uncertainty involved. In such cases revenue is recognized only when it is reasonably certain that the ultimate collection will be made.

9 Foreign Currency Transactions

a) Initial Recognition: Transactions denominated in foreign currencies are recorded at the exchange rates prevailing on the date of the transaction.

b) Conversion: At the year end, monetary items denominated in foreign currencies other than those covered by forward contracts are converted into rupee equivalents at the year-end exchange rates.

c) Forward Exchange Contracts: In respect of transactions covered by forward exchange contracts, the difference between the forward rate and the exchange rate at the date of the transaction is recognized as income or expense over the life of the contract.

d) Exchange Differences: All exchange differences arising on settlement/conversion on foreign currency transactions are included in the Profit and Loss Account.

e) Foreign entities: Assets and liabilities of foreign entities are translated into rupee equivalents using year-end spot foreign exchange rates. Revenues and expenses are translated monthly at average exchange rates.

10 Leases

Operating lease payments are recognized as an expense in the profit and loss account on a straight-line basis over the lease term.

11 Borrowing Costs

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalized as part of the cost of that asset. Other borrowing costs are recognized as an expense in the period in which they are incurred.

12 Investments

Investments that are readily realizable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long-term investments.

a) Current investments are carried at lower of cost and fair value determined on an individual investment basis.

b) Long-term investments are carried at cost. However, provision for diminution in value is made to recognize a decline other than temporary in the value of the investments.

13 Employee Benefits

Short term compensated absence benefits (both vesting and non vesting) are accounted for on the basis of the actual valuation of the leave entitlement as on the balance sheet date.

The actuarial valuations in respect of post employment defined benefit plans and long term employee benefits as at the balance sheet date are measured using Projected Unit Credit Method.

KIRLOSKAR BROTHERS LIMITEDth

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I. Short Term Employee Benefits:

All employee benefits payable wholly within twelve months of rendering the services are classified as short term employee benefits. Benefits such as salaries, wages, and short term compensated absence, etc. and the expected cost of bonus, is recognized in the period in which the employee renders the related service.

II. Post-Employment Benefits:

a) Defined Contribution Plans:

The Company's superannuation scheme, state governed provident fund scheme related to Dewas factory and employee state insurance scheme are defined contribution plans. The contribution paid/payable under the scheme is recognized during the period in which the employee renders the related service.

b) Defined Benefit Plans:

The employees' gratuity fund scheme, provident fund scheme managed by a Trust and pension scheme are the Company's defined benefit plans. The present value of the obligation under such defined benefit plans is determined based on actuarial valuation using the Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.

The obligation is measured at the present value of the estimated future cash flows. The discount rates used for determining the present value of the obligation under defined benefit plans, is based on the market yields on Government Securities as at the balance sheet date, having maturity periods approximating to the terms of related obligations.

Actuarial gains and losses are recognized immediately in the profit & loss account.

In case of funded plans, the fair value of the plan's assets is reduced from the gross obligation under the defined benefit plans, to recognize the obligation on net basis.

Gains or losses on the curtailment or settlement of any defined benefit plan are recognized when the curtailment or settlement occurs. Past service cost is recognized as expenses on a straight-line basis over the average period until the benefits become vested.

The Company pays contribution to a recognized provident fund trust in respect of all locations except Dewas factory. The guidance note on implementing AS 15, Employees Benefits (Revised 2006) issued by the Institute of Chartered Accountants of India (ICAI) states that provident funds set up by employer, which requires interest shortfall to be met by the employer, needs to be treated as a defined benefit plan. In the absence of clear guidelines on the issue of Actuarial Valuation related to the interest shortfall to be made by the employer, the Company's actuary has expressed their inability to reliably measure the provident fund liability of the Company's recognized provident fund. Accordingly, the Company is unable to exhibit the related disclosures.

III. Long Term Employee Benefits:

The obligation for long term employee benefits such as long term compensated absences, is recognized in the same manner as in the case of defined benefit plans as mentioned in note II (b) above.

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IV. Termination Benefits:

Where termination benefits such as compensation under voluntary retirement scheme is payable within a year of the balance sheet date, the actual amount of termination benefits is accounted as expense in year of accrual. Where termination benefits are payable beyond one year of the balance sheet date, the discounted amount of termination benefits is amortised over a definite period.

14 Employee Stock Options Scheme

In respect of stock options granted pursuant to the Company's Employee Stock Option Scheme, the intrinsic value of the options (excess of market price of the share over the exercise price of the option) is treated as discount and accounted as employee compensation cost over the vesting period.

15 Taxes on Income

a) Tax on income for the current period is determined on the basis of taxable income after considering the various deductions available under the Income Tax Act, 1961.

b) Deferred tax is recognized on timing differences between the accounting income and the taxable income for the year. The tax effect is calculated on the accumulated timing differences at the end of accounting period based on prevailing enacted or subsequently enacted regulations.

16 Segment Accounting

a) The accounting policies for individual segments are in line with accounting policies of the Company.

b) Segment revenue from inter segment transactions is accounted on the basis of transfer price agreed between the segments. Such transfer prices are determined with reference to the desired margins.

17 Accounting for interests in Joint Ventures

Type of Joint Venture

A. Jointly Controlled Operations

Company's share of revenue, expenses, assets and liabilities are included in revenues, expenses, assets and liabilities respectively.

B. Jointly Controlled Entities

Investment in such Joint Ventures is carried at cost after providing for any permanent diminution in value, if applicable. Income on investments in incorporated Jointly Controlled Entities is recognized when the right to receive the same is established.

18 Provisions

A provision is recognized when an enterprise has a present obligation as a result of a past event and it is probable that an outflow of resources is expected to settle the obligation, in respect of which a reliable estimate can be made. Provisions are reviewed at each balance sheet date and adjusted to reflect the current management estimates.

B] OTHER NOTES

1 Interest paid - others Rs. 256,796,495/- (Rs.125,600,515/-) is net of Rs.27,020,156/- (Rs.29,029,732/-) being interest received from customers and on deposits. [Tax deducted at source Rs.1,724,577/- (Rs.3,036,232/-)]

2 Net loss on foreign currency transactions on revenue accounts recognised in the profit and loss account is Rs.107,867,741 /- ( Rs.16,249,217/-).

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2009 2008 Rupees Rupees

3 Estimated amount of contracts remaining to be executed on

capital account and not provided for 189,734,603 552,334,210

4 Contingent liabilities not provided for in respect of :

a) Guarantees:

By the Company to ICICI Bank Ltd. on behalf of

SPP Pumps Ltd. , UK 147,040,000 159,960,000

By the Company to Barclays Bank Ltd. on behalf

of SPP Pumps Ltd. , UK 294,080,000 319,920,000

By the Company to Citi Bank N A. on behalf of

SPP Pumps Ltd. , UK 588,160,000 639,840,000

By the Company to Indian Overseas Bank Ltd.

on behalf of Kirloskar Constructions &

Engineers Ltd., Chennai 800,000,000 500,000,000

By the Company to Bank of Maharashtra on

behalf of Gondwana Engineers Limited 145,000,000 -

b) Central Excise (Matter Subjudice) 14,347,263 4,482,000

c) Sales Tax (Matter Subjudice) 89,056,373 98,386,118

d) Income Tax (Matter Subjudice) 395,323,477 -

e) Labour Matters (Matter Subjudice) 39,278,282 35,320,699

f) Other Legal Cases ( Matter Subjudice ) 18,792,301 11,232,651

g) Letters of Credit Outstanding 2,366,640,832 1,284,654,309

5 Construction Contracts:

a. Contract revenue recognised as revenue

for the year ended 31st March 2009 8,728,394,699 7,260,655,608

b. The aggregate amount of contract costs incurred

and recognised profits less recognised losses

upto 31st March 2009 31,790,631,155 23,120,651,320

c. Amount of advances received as on 31st March 2009

for contracts in progress 935,338,671 782,137,542

d. Amount of retentions as on 31st March 2009 for

contracts in progress 410,720,520 249,424,764

6 Remuneration to Auditors

Statutory Auditors :

a) Audit Fees 1,654,500 1,685,400

b) Tax Audit Fees 150,000 150,000

c) Certification and other services 688,250 972,995

d) Expenses reimbursed 507,048 362,742

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2009 2008 Rupees Rupees

7 Managerial Remuneration

Computation of Managerial Remuneration in accordance

with section 198 of the Companies Act,1956

Profit as per profit and loss account before

provision for taxation 982,203,176 1,500,406,123

Add:

Managerial remuneration 54,450,136 50,287,533

Directors' remuneration 7,565,000 6,370,000

Directors' fees 970,000 810,000

Provision for doubtful debts and advances 70,609,776 18,549,702

1,115,798,088 1,576,423,358

Less :

Capital profit on sale of fixed assets 1,136,470 1,657,690

Employee benefits debited to General Reserve - 56,868,940

1,136,470 58,526,630

1,114,661,618 1,517,896,728

Commission to other Directors @ 1% 11,146,616 15,178,967

Restricted to 7,565,000 6,370,000

Details of Managerial Remuneration

a) Salary 17,767,200 17,692,560

b) Contribution to provident fund and superannuation fund 4,795,200 4,774,950

c) Commission 25,000,000 21,500,000

d) Perquisites 6,887,736 6,320,023

54,450,136 50,287,533

e) Estimated value of other benefits 116,817 95,472

TOTAL 54,566,953 50,383,005

8 Expenditure in foreign currencies

i) Interest 9,530,280 1,465,967

ii) Professional fees 29,205,216 30,942,651

iii) Royalty 458,512 -

iv) Other matters 346,633,215 125,324,306

9 Earnings in Foreign Currencies

i) F.O.B. value of goods exported 2,239,672,656 1,483,499,424

ii) Others 241,292,690 13,398,331

10 C.I.F. Value of Imports

i) Raw materials, components & spare parts 1,883,493,356 1,111,426,134

ii) Capital goods 200,926,083 40,549,198

11 Expenditure Incurred on Research and

Development activities undertaken during the year

Capital 16,707,375 5,734,927

Revenue 34,156,669 60,375,574

TOTAL 50,864,044 66,110,501

KIRLOSKAR BROTHERS LIMITEDth

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2009 2008 Rupees Rupees

12 Earning per Share ( Basic and diluted )

I - Basic

a) Profit for the year before tax 982,203,176 1,500,406,123

Less : Attributable tax thereto 311,916,578 399,039,651

Profit after tax 670,286,598 1,101,366,472

b) Total number of equity shares at the end of the year

used as denominator 105,764,355 105,764,355

c) Basic earning per share of nominal value of Rs 2/- each 6.34 10.41

II - Diluted

a) Profit for the year before tax 982,203,176 1,500,406,123

Less : Attributable tax thereto 311,916,578 399,039,651

670,286,598 1,101,366,472

b) Total number of equity shares at the end of the year 105,764,355 105,764,355

c) Add : Weighted average number of potential equity

shares on account of employee stock options - 277,615

Weighted average number of shares outstanding

used as denominator 105,764,355 106,041,970

d) Diluted earning per share of nominal value of Rs 2/- each 6.34 10.39

13 Advances recoverable in cash or kind or for value to be received include

a) Advance recoverable from Companies under same management

1) Kirloskar Systems Limited 5,248,345 5,248,345

Maximum amount outstanding during the year 5,248,345 5,248,345

2) Kirloskar Proprietary Limited - -

Maximum amount outstanding during the year 3,547,000 5,200,000

3) Pressmatic Electrostampings Pvt. Limited 284,843 -

Maximum amount outstanding during the year 732,519 -

4) Quadromatic Engineering Pvt. Limited 348,765 -

Maximum amount outstanding during the year 348,765 -

14 Amount of Borrowing Cost Capitalised during the year 29,203,312 9,250,002

15 As per the information available with the Company till date; none of the suppliers have informed the Company about their having registered themselves under the "Micro, Small and Medium Enterprises Development Act, 2006". As such, information as required under this Act, cannot be compiled and therefore, not disclosed for the year.

16 Employee Benefits :

i Defined Contribution Plans

Amount of Rs 43,120,522/-; is recognised as an expense and included in "Payments and Benefits to Employees" (Schedule 21) in the profit and loss account.

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ii Defined Benefit Plans

a) The amounts recognised in Balance Sheet are as follows :

Rupees

As at 31-03-2009 As at 31-03-2008

Particulars Gratutity Plan Pension Scheme Gratutity Plan Pension Scheme(Funded) (Non Funded) (Funded) (Non Funded)

A. Amount to be recognised in Balance Sheet

Present value of defined benefit obligation 183,076,249 19,257,771 176,344,206 16,999,644

Less: Fair value of plan assets 208,657,491 - 190,460,641 -

Amount to be recognised as

liability or (asset) (25,581,242) 19,257,771 (14,116,435) 16,999,644

B. Amounts reflected in the Balance Sheet

Liabilities - 19,257,771 - 16,999,644

Assets 25,581,242 - 14,116,435 -

Net Liability/(Assets) (25,581,242) 19,257,771 (14,116,435) 16,999,644

b) The amounts recognised in Profit and Loss Account are as follows :

Rupees

As at 31-03-2009 As at 31-03-2008

Particulars Gratutity Plan Pension Scheme Gratutity Plan Pension Scheme(Funded) (Non Funded) (Funded) (Non Funded)

1 Current Service Cost 12,455,848 - 12,026,064 -

2 Interest Cost 14,006,496 1,386,089 15,044,895 -

3 Expected Return on Plan Assets 35,022,607 - 14,600,907 -

4 Actuarial Losses/(Gains) (2,904,544) 2,949,432 (26,586,487) (3,694,546)

5 Past Service Cost - - - -

6 Effect of any curtailment or settlement - -

7 Actuarial Gain not recognised in books - - -

8 Adjustment for earlier years - - -

Total included in Schedule 21

"Payment to Employees" (11,464,807) 4,335,521 (14,116,435) (3,694,546)

Actual Return on Plan Assets 9.40% 9.35% -

c) The changes in the present value of defined benefit obligation representing reconciliation of opening and closing balances thereof are as follows:

Rupees

As at 31-03-2009 As at 31-03-2008

Particulars Gratutity Plan Pension Scheme Gratutity Plan Pension Scheme(Funded) (Non Funded) (Funded) (Non Funded)

1 Balance of the present value of

Defined benefit Obligation as at 01-04-2008 176,344,206 16,999,644 188,061,185 22,830,190

2 Add: Current Service Cost 12,455,848 - 12,026,064 -

Add: Interest Cost 14,006,496 1,386,089 15,044,895 -

3 Add/(less): Actuarial losses / (gains) (2,904,544) 2,949,432 (25,672,009) (3,694,546)

4 Less: Benefits paid (16,825,757) (2,077,394) (13,115,929) (2,136,000)

5 Balance of the present value of

Defined Benefit Obligation

as at 31-03-2009 183,076,249 19,257,771 176,344,206 16,999,644

KIRLOSKAR BROTHERS LIMITEDth

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d) Changes in the fair value of plan assets representing reconciliation of the opening and closing balances thereof are as follows

Rupees

Gratutity

Particulars Plan (Funded)

31.03.2009 31.03.2008

1 Opening balance of the fair value of the

plan assets as at 01-04-2008 190,460,641 179,793,799

2 Add: Expected Return on plan assets 35,022,607 14,600,907

3 Add/(less) : Actuarial gains/(losses) - 914,477

4 Add: Contribution by the employer - 8,267,387

5 Less: Benefits paid 16,825,757 13,115,929

6 Closing balance of the plan assets as at 31-03-2009 208,657,491 190,460,641

e) The broad categories of plan assets as a percentage of total plan assets as at 31-03-2009 of Employee's Gratuity Scheme are as under :

Sr. No Description Percentage (%)

2009 2008

1 Central Govt. Securities 56.09 63.28

2 State Govt. Securities 11.18 13.57

3 Approved Marketable Securities 2.96 0.24

4 Bonds/Debentures etc. 22.03 17.67

5 Loans 0.36 0.47

6 Equity 5.64 2.43

7 Liquid Fund/Money Market Instrument 1.72 2.34

8 Preference Shares 0.02 -

Grand Total 100.00 100.00

Basis used to determine the overall expected return

Life Insurance Corporation (LIC) manages the investments of Employee Gratuity Scheme. Expected rate of return on investments is determined based on the assessment made by the LIC at the beginning of the year on the return expected on its existing portfolio, alongwith the estimated incremental investments to be made during the year. Yield on the portfolio is calculated based on a suitable mark-up over the benchmark Government securities of similar maturities.

f) Principal actuarial assumptions at the balance sheet (expressed as weighted averages)

1 Discount rate as at 31-03-2009 - 8%

2 Expected return on plan assets as at 31-03-2009 - 9.4%

3 Salary growth rate : For Gratuity Scheme - 8%

4 Attrition rate: For gratuity scheme the attrition rate varies from 1% to 4% for various age groups.

5 The estimates of future salary increases, considered in actuarial valuation, taken into account inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

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17 Quantitative information in respect of Opening/Closing Stocks of goods manufactured :

Particulars Unit Opening Stock Closing Stock Qty Value in Qty Value in

Rupees RupeesPower Driven Pumps Nos. 13,505 78,153,903 * 11,432 87,856,670

(13,752) (107,805,295) (13,505) (78,153,903)Electric Motors Nos. 3,315 20,938,698 ** 3,659 33,070,078

(3,336) (10,897,627) (3,315) (20,938,698)Valves Nos. 13 13 14 14

(56) (197,396) (13) (13)Spares and Others - 25,798,432 - 12,295,724

( - ) (22,080,059) ( - ) (25,798,432)TOTAL 124,891,046 133,222,486

(140,980,377) (124,891,046)

Note : * Excludes 920 ( 366 ) Nos. of power driven pumps scrapped. ** Excludes 207 (50 ) Nos of motors scrapped.

18 Quantitative information in respect of Opening/Closing Stocks of Trading Articles :

Particulars Unit Opening Stock Closing StockQty Value in Qty Value in

Rupees RupeesPumps Nos. 11,837 23,824,798 * 5,895 15,595,331

(8,605) (29,642,693) (11,837) (23,824,798)Valves Nos. 1,638 3,566,323 2,000 2,219,222 (2,017) (2,543,051) (1,638) (3,566,323)Motors Nos. 1 21,189 ** - 75,597

(1) - (1) (21,189)Alternators Nos. 251 4,948,520 248 5,803,347

(147) (2,797,092) (251) (4,948,520)Transformers Nos. - - - - (2) (566,475) ( - ) ( - )Others - 65,212,485 - 84,880,425

- (41,982,777) - (65,212,485)TOTAL 97,573,315 108,573,922

(77,532,088) (97,573,315)

* Excludes 356 (2) No of pumps scrapped & excludes 13 (Nil) No. of pumps theft.** Excludes 1 (Nil) no of motor scrapped.

g) The amounts pertaining to defined benefit plans are as follows:Rupee

As at 31-03-2009 As at 31-03-2008

Particulars Gratutity Pension Scheme Gratutity Pension Scheme Plan (Funded) (Non Funded) Plan (Funded) (Non Funded)

Defined Benefit Obligation 183,076,249 19,257,771 176,344,206 16,999,644 Plan Assets 208,657,491 - 190,460,641 - Surplus/(Deficit) 25,581,242 (19,257,771) 14,116,435 (16,999,644)

h) General descriptions of defined plans:

1 Gratuity Plan:

The Company operates gratuity plan wherein every employee is entitled to the benefit equivalent to fifteen days salary last drawn for each completed year of service. The same is payable on termination of service, or retirement, whichever is earlier. The benefit vests after five years of continuous service.

2 Company's Pension Plan:

The company operates a Pension Scheme for a specified ex-employees wherein the beneficiaries are entitled to defined monthly pension.

KIRLOSKAR BROTHERS LIMITEDth

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19 Quantitative information in respect of Sales of Manufactured Products :

Particulars 2008-09 Previous Year

Unit * @ Value * @ Value

Qty. Rupees Qty. Rupees

Power Driven Pumps Nos. 207,180 7,699,508,855 229,228 6,387,602,449

Valves Nos. 26,653 1,007,789,944 27,671 668,362,000

Turbines Nos. 8 35,941,679 8 33,257,168

Electric Motors Nos. 23,309 250,685,614 29,607 234,802,223

Alloy Iron Castings

including Steel Castings M.T. 1,114 272,697,342 1,099 183,663,745

& Cast Iron Castings

Spare Parts and Others 1,309,794,501 1,298,594,413

Services and Job Order Receipts 607,686,869 344,520,605

Civil Receipts 1,860,242,936 2,559,335,565

TOTAL 13,044,347,740 11,710,138,168

* Includes 389 (185) Power driven pumps, 304 (542) Valves, included in Construction and project related revenue.

20 Quantitative information in respect of Purchases and Sales of Trading Articles :

Particulars Unit Purchases Sales

Value * @ Value

Qty. Rupees Qty. Rupees

Pumps Nos. 152,244 291,181,300 157,817 389,096,046

(160,998) (334,688,528) (157,764) (425,712,619)

Valves Nos. 24,178 62,213,991 23,816 123,283,288

(11,642) (88,367,672) (12,021) (104,364,655)

Transformers Nos. 1,173 218,549,690 1,173 337,746,502

(1,644) (229,325,724) (1,646) (354,249,352)

Alternators Nos. 6,334 124,846,541 6,337 152,030,409

(7,806) (139,831,060) (7,702) (162,512,698)

Others - 3,995,901,308 - 4,723,847,435

- (2,212,223,431) - (2,770,075,368)

TOTAL 4,692,692,830 5,726,003,680

(3,004,436,415) (3,816,914,692)

* Includes 20 (Nil) Pumps, 303 (135) Valves, 1109 (1601) Transformers included in Construction & Project Related Revenue

@ Includes Progress billing of Rs. 9,189,298,139/- (Rs. 7,536,247,022/-) related to construction contracts accounted in the profit and loss account as Project related revenue of Rs. 8,728,394,699/- (Rs. 7,260,655,608/-) in terms of Accounting Standard 7 on Construction Contracts.

}

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21 Consumption of Raw Materials, Components and Spare Parts:

2008-09 Previous Year

Particulars Rupees Percentage Rupees Percentage

Imported 382,591,596 4.34 393,979,691 5.07

Indigenous 8,434,750,809 95.66 7,380,464,902 94.93

TOTAL 8,817,342,405 100.00 7,774,444,593 100.00

22 Details of Raw Materials Consumption :

2008-09 Previous Year

Particulars Unit Quantity Value Quantity Value

a) Pig Iron M.T. 5,253.59 140,555,056 4,707.00 90,914,869

b) Castings Nos 691,848 270,470,423 631,928 519,283,436

c) Stator Stacks Nos. 121,566 219,939,021 178,134 85,050,976

d) Rotors Nos. 151,872 83,422,058 186,374 174,829,381

e) Motors Nos. 5,079 2,093,409,761 5,096 2,361,517,251

f) Engines Nos. 1,044 127,678,549 949 115,867,997

g) Motor Frames Nos. 22,475 105,384,649 27,291 122,330,179

h) Others - 5,776,482,889 - 4,304,650,504

TOTAL : 8,817,342,405 7,774,444,593

KIRLOSKAR BROTHERS LIMITEDth

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23 Details of Licensed Capacity, Installed Capacity and Production of goods manufactured :

Sr. Class of Goods Unit Licensed capacity Installed capacity Production

No. 2008-09 Previous Previous PreviousYear Year Year

1. Power Driven Pumps Nos. 194,000 194,000 194,000 194,000 @ 206,107 229,348

2. Metal Cutting includingGrinding Machines " 736 736 736 736 - -

3. Reduction Gear Units " 1,200 1,200 1,200 1,200 - -

4. Valves " 70,070 70,070 70,070 70,070 26,654 27,628

5. Ploughs " 3,216 3,216 3,216 3,216

6. Alloy Iron Castings * * * *including Steel Castings M.T. 120 120 120 120

7. Cast Iron Castings M.T. 2,500 2,500 2,500 2,500

8. Cast Iron Castings 1,113.526 1,099.270 including Alloy M.T. 5,000 5,000 5,000 5,000Steel castings for Automotive purposes

9. Turbines Nos. 8 8

10 Electric Motors Nos. @@ 23,872 29,639

2008-09 2008-09

@ Includes 80 ( 1 ) for own use.

@@ Includes 12 ( 3 ) for own use.

* Per annum on single shift basis.

Notes :

a) Licensed Capacity includes registered capacities for activities existing prior to the Industries (Development Regulation) Act, 1951, but does not include licenses held for captive capacities.

b) It is not practicable to indicate precisely installed capacity of each type of product manufactured by the Company, as the capacity of various facilities available is overlapping for each product. Besides, the Company manufactures a very large range amongst the licensed products which, in turn, is decided by actual demand from time to time. Also the Company buys components, parts and other services from outside. The installed capacities as indicated above are estimates as certified by the Managing Director and accepted by the Auditors.

c) In terms of notification no. 477E dt. 25-7-91 issued by Department of Industrial Development, industrial licenses are not required for the products manufactured by the Company except centrifugal pumps manufactured at Dewas below 10 cm x 10 cm which are reserved for small scale sector. Revalidation of industrial license in this range of pumps is under process.

}

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24. Related Party Disclosures

(A) Names of the related party and nature of relationship where control exists

Name of the related party Nature of relationship

1. Better Value Holdings Pvt. Ltd. Holding Company

2. Pooja Credits Pvt. Ltd. Subsidiary Company

3. Kirloskar Silk Industries Ltd. Subsidiary Company

4. Kirloskar Constructions and Engineers Ltd. Subsidiary Company

5. Gondwana Engineers Ltd. Subsidiary Company

6. Kirloskar Brothers International B. V. Subsidiary Company

7. The Kolhapur Steel Limited (from 02.08.2008) Subsidiary Company

8. Kirloskar Brothers Europe B.V. (From 13.05.2008) Subsidiary of Kirloskar Brothers International BV

9. Kirloskar Brothers (Thailand) Ltd. (From 26.09.2008) Subsidiary Company

10. SPP Pumps Ltd. U K. Subsidiary Company

11. SPP Pumps France EURL Subsidiary of SPP Pumps Ltd. U K

12. Certified Engines Ltd Subsidiary of SPP Pumps Ltd. U K

13. SPP (South Africa) (Pty) Ltd. Subsidiary of SPP Pumps Ltd. U K

14. SPP Pumps LP Subsidiary of SPP Pumps Ltd. U K

15. SPP France S A S Subsidiary of SPP Pumps Ltd. U K

16. SPP Pumps Management LLC Subsidiary of SPP Pumps Ltd. U K

17. SPP Pumps Holdings LLC Subsidiary of SPP Pumps Ltd. U K

18 . Hematic Motors Pvt. Ltd. Fellow Subsidiary Company

19. Pressmatic Electro Stampings Pvt. Ltd. Fellow Subsidiary Company

20. Quadromatic Engineering Pvt. Ltd. Fellow Subsidiary Company

21. Vakasa Electricals Pvt. Ltd. Fellow Subsidiary Company

22. Moreshwar Electricals Pvt. Ltd. Fellow Subsidiary Company

23. Ila Electricals Pvt. Ltd. Fellow Subsidiary Company

24. Kirloskar Oil Engines Limited Fellow Subsidiary Company

25. Kirloskar Pneumatic Company Limited Fellow Subsidiary Company

26. Kirloskar Systems Limited Fellow Subsidiary Company

27. Kirloskar Proprietary Limited Fellow Subsidiary Company

KIRLOSKAR BROTHERS LIMITEDth

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1) Purchases of Goods - 991,284,120 70,669,193 - - - 1,061,953,313

- (65,173,660) (279,014,797) - - - (344,188,457)

2) Sale of Goods - 302,293,811 1,277,601 - - - 303,571,412

- (196,041,132) (751,975) - - - (196,793,107)

3) Rendering of Services - 19,441,708 11,769,810 - - - 31,211,518

- (19,221,408) (17,878,322) - - - (37,099,730)

4) Receiving of Services - 5,849,512 - 450,000 2,610,000 - 8,909,512

- - (564,989) - (2,820,000) (450,000) (3,834,989)

5) Dividend Received - 127,029,847 18,050,000 - - - 145,079,847

- (401,600) (9,119,700) - - - (9,521,300)

6) Dividend Paid 211,625,340 630,000 - 5,217,216 256,400 - 217,728,956

- - (210,000) (3,050,598) (124,200) (105,389,610) (108,774,408)

7) Interest Received - 8,204,440 - - - - 8,204,440

- (7,546,442) - - - - (7,546,442)

8) Interest Paid - 2,854,795 - - - - 2,854,795

- - (665,754) - - - (665,754)

9) Investment Made - 97,053,263 - - - - 97,053,263

- (84,966,717) - - - - (84,966,717)

10) Remuneration Paid - - - 54,450,136 530,000 - 54,980,136

- - - (50,287,533) (1,272,601) - (51,560,134)

11) Payment received towards repayment of loan - 8,800,000 - - - - 8,800,000

- (47,000,000) - - - - (47,000,000)

12) Sale of Fixed Assets - - - - - - -

- - (181,600) - - - (181,600)

13) Loan Given - 630,790,392 - - - - 630,790,392

- (69,500,000) - - - - (69,500,000)

14) Reimbursement of Expenses - 23,281,680 5,548,635 - - - 28,830,315

- (8,179,132) (2,714,059) - - - (10,893,191)

15) Inter Corporate Deposit Repayment - 20,000,000 - - - - 20,000,000

- - - - - - -

16) Deposit Paid - - - 1,700,000 3,400,000 - 5,100,000

- - - - - (5,000,000) (5,000,000)

17) Inter Corporate Deposit Recd - 10,000,000 - - - - 10,000,000

- - (50,000,000) - - - (50,000,000)

18) Royalty Paid - 47,137,925 - - - - 47,137,925

- - - - - - -

19) Royalty Received - 1,334,443 - - - - 1,334,443

- - - - - - -

20) Commission Paid - 5,582,167 - - - - 5,582,167

- - - - - - -

21) Balance Outstanding Debit (Credit) - 604,973,056 (3,543,242) (23,300,000) 3,400,000 - 581,529,814

- 145,421,151 (119,052,086) (21,500,000) 3,510,000 5,248,345 13,627,410

B) Related Party Transactions (In Rupees)

Nature of Transaction Holding Subsidiary Associates Key Relatives Enterprises Total Company & Fellow & Joint Management of Key over

Subsidiary Ventures Personnel Management which keyCompanies Personnel managerial

personnel ortheir relativesexercisesignificant influence

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(C)

1) Holding Compnay Better Value Holdings Pvt. Ltd.2) Subsidiary Companies Pooja Credits Pvt. Ltd.

Kirloskar Constructions and Engineers Ltd. Kirloskar Silk Industries Ltd.Gondwana Engineers Ltd. SPP Pumps Ltd., UKCertified Engines Ltd.SPP (South Africa) (Pty) Ltd. SPP Pumps LP SPP Pumps Management LLCSPP Pumps Holdings LLCSPP Pumps France EURLSPP France S A SKirloskar Brothers International B V The Kolhapur Steel Limited (From 02.08.2008)Kirloskar Brothers Europe B.V. (From 13.05.2008)Kirloskar Brothers (Thailand) Ltd. (From 26.09.2008)

3) Fellow Subsidiary Companies Hematic Motors Pvt. Ltd.Pressmatic Electro Stampings Pvt. Ltd.Quadromatic Engineering Pvt. Ltd.Vakasa Electricals Pvt. Ltd.Moreshwar Electricals Pvt. Ltd.Ila Electricals Pvt. Ltd.Kirloskar Oil Engines LimitedKirloskar Pneumatic Company LimitedKirloskar Sytems Ltd.Kirloskar Proprietary Limited

4) Joint Ventures Kirloskar Ebara Pumps Ltd.Kirloskar Corrocoat Pvt. Ltd.

5) Key Management Personnel Mr. Sanjay KirloskarMr. Vikram KirloskarMr. R. K. SrivastavaMr. J. R. Sapre

6) Relatives of Key Management Mrs. Pratima Kirloskar Wife of Mr. S. C. KirloskarPersonnel Mr. Alok Kirloskar Son of Mr. S. C. Kirloskar

Ms. Rama Kirloskar Daughter of Mr. S. C. KirloskarMrs. Suman Kirloskar Mother of Mr. S. C. KirloskarMr. Atul Kirloskar Brother of Mr. S. C. KirloskarMr. Rahul Kirloskar Brother of Mr. S. C. KirloskarMrs. Geetanjali Kirloskar Wife of Mr. Vikram KirloskarMrs. Mrinalini Kirloskar Mother of Mr. Vikram KirloskarMrs. Vijayalaxmi Srivastava Wife of Mr. R. K. SrivastavaMrs. Asha J. Sapre Wife of Mr. J. R. Sapre

7) Jointlly controlled operations HCC – KBL Joint Venture KBL – MCCL Joint VentureKCCPL – IHP – BRC – TAIPPL – KBL JVIVRCL – KBL JVMaytas – KBL JVLarsen & Toubro – KBL JVKBL-MEIL-KCCPL JVKBL – PLR JVKBL – Koya – VA Tech JVKBL – PIL ConsortiumLarsen & Toubro – KBL – Maytas JVIVRCL – KBL – MEIL JVPioneer – Avantica – ZVS – KBL JVAMR – Maytas – KBL – WEG JVIndu – Shrinivasa Constructions – KBL – WEG JVMEIL – KBL – IVRCL JVMEIL – Maytas – KBL JVKCCPL – TAIPPL – KBL JV

Names of Related Parties with whom transactions have been entered into:

KIRLOSKAR BROTHERS LIMITEDth

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(D) Disclosure pursuant to clause 32 of the listing agreement regarding loans and advances to subsidiary and associate companies:

Loans and advances in the nature of loans: Rupees

Sr. No. Name of the Company Balance as at Maximum outstanding 31.03.2009 31.03.2008 31.03.2009 31.03.2008

A To Subsidiary Companies 1 Pooja Credits Pvt. Ltd. - - - 2,600,000 2 Kirloskar Silk Industries Ltd. 406,404 406,404 406,404 406,404 3 Kirloskar Constructions and

Engineers Ltd. 505,550,000 45,000,000 505,550,000 45,000,000 4 Gondwana Engineers Ltd. 13,000,000 15,500,000 15,500,000 19,500,000 5 Kirloskar Brothers International B V

(Its Subsidiary) - - - - 6 SPP Pumps Ltd. (its Subsidiaries) - - - - 7 The Kolhapur Steel Limited 118,940,392 - 121,940,392 - 8 Kirloskar Brothers (Thailand) Ltd. - - - -

TOTAL 637,896,796 60,906,404 643,396,796 67,506,404

B To Fellow Subsidiary CompaniesHematic Motors Pvt Ltd - - - - Pressmatic Electro Stampings Pvt. Ltd. - - - - Quadromatic Engineering Pvt. Ltd. - - - - TOTAL - - - -

C Loans and advances in the nature of loan where there is,i) No repayment schedule:

Sr. No. Name of the Company Balance as at Maximum outstanding 31.03.2009 31.03.2008 31.03.2009 31.03.2008

1 Pooja Credits Pvt. Ltd. - - - 2,600,000 2 Kirloskar Silk Industries Ltd. 406,404 406,404 406,404 406,404 3 Kirloskar Constructions and

Engineers Ltd. 505,550,000 45,000,000 505,550,000 45,000,000 4 Gondwana Engineers Ltd. 13,000,000 15,500,000 15,500,000 19,500,000 5 The Kolhapur Steel Limited 118,940,392 - 121,940,392 -

ii) No interest charged:

Sr. No. Name of the Company Balance as at Maximum outstanding 31.03.2009 31.03.2008 31.03.2009 31.03.2008

1 Kirloskar Silk Industries Ltd. 406,404 406,404 406,404 406,404 2 Kirloskar Constructions and

Engineers Ltd. * 505,550,000 - 505,550,000 - 3 The Kolhapur Steel Limited 57,500,000 - 57,500,000 -

* Note: Interest was charged during the Financial year 2007-2008, on the loan to Kirloskar Constructions and Engineers Ltd.

D Loans and advances in the nature of loans to firms/companies in which directors are interested: NIL

E Investment by the loanee (borrower) in the shares of the Company or subsidiary of the Company : NIL

Note:- Loans to employees including directors under various schemes of the company (such as housing loan, furniture loan, education loan etc.) have been considered to be outside the purview of this disclosure requirements.

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SCHEDULE 25: NOTES FORMING PART OF ACCOUNTS (CONTD.)

25. Particulars related to Joint Ventures :

a) List of Joint Ventures

Sr. No. Name of the Joint Venture Description Ownership Country of Interest Incorporation

1 Kirloskar Ebara Pumps Ltd. Jointly 45% India controlled entity

2 Kirloskar Corrocoat Pvt. Ltd. Jointly 50% India controlled entity

3 HCC – KBL Joint Venture Jointly N A India controlled operations

4 KBL – MCCL Joint Venture Jointly N A India controlled operations

5 KCCPL – IHP – BRC – TAIPPL – KBL JV Jointly N A India controlled operations

6 IVRCL – KBL JV Jointly N A India controlled operations

7 Maytas – KBL JV Jointly N A India controlled operations

8 Larsen & Toubro – KBL JV Jointly N A India controlled operations

9 KBL-MEIL-KCCPL JV Jointly N A India controlled operations

10 KBL – PLR JV Jointly N A India controlled operations

11 KBL – Koya – VA Tech JV Jointly N A India controlled operations

12 KBL – PIL Consortium Jointly N A India controlled operations

13 Larsen & Toubro – KBL – Maytas JV Jointly N A India controlled operations

14 IVRCL – KBL – MEIL JV Jointly N A India controlled operations

15 Pioneer – Avantica – ZVS – KBL JV Jointly N A India controlled operations

16 AMR – Maytas – KBL – WEG JV Jointly N A India controlled operations

17 Indu – Shrinivasa Constructions – Jointly N A India KBL – WEG JV controlled operations

18 MEIL – KBL – IVRCL JV Jointly N A India controlled operations

19 MEIL – Maytas – KBL JV Jointly N A India controlled operations

20 KCCPL – TAIPPL – KBL JV Jointly N A India controlled operations

KIRLOSKAR BROTHERS LIMITEDth

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SCHEDULE 25: NOTES FORMING PART OF ACCOUNTS (CONTD.)

b) Financial Interest in Jointly controlled entities

Sr. No. Name of the Joint Venture Company's share in

Rupees Rupees

As at 31st March, 2009 As at 31st March, 2008 1 Kirloskar Ebara Pumps Ltd. Assets 385,701,714 315,685,391

Liabilities 383,451,714 313,435,391

For the year ended For the year ended31st March 2009 31st March 2008

Income 577,083,045 571,948,223 Expenses 410,641,304 442,179,011

As at 31st March 2009 As at 31st March 2008 2 Kirloskar Corrcoat Private Ltd. Assets 88,852,334 67,773,632

Liabilities 63,852,334 42,773,632

For the year ended For the year ended31st March 2009 31st March 2008

Income 151,320,186 126,495,190 Expenses 112,525,508 88,675,174

c) Contingent liabilities , if any , incurred in relation to interest in Joint Ventures N I Ld ) Capital commitments , if any , in relation to interest in Joint Ventures N I L

26. Details of provisions and movements in each class of provisions.

Particulars As at 31st March,2009 (Rs.)

Income Tax WarrantyRupees Rupees

Carrying amount at the beginning of the year 1,259,682,546 28,257,896 (899,682,546) (25,998,716)

Additional provision made during the year 306,000,000 31,856,656 (360,000,000) (28,257,896)

Amount used during the year - 28,257,896 - (25,998,716)

Unused amounts reversed during the year - - - -

Carrying amount at the end of the year 1,565,682,546 31,856,656 (1,259,682,546) (28,257,896)

Brief description of the nature of the obligation and the expected timing of any resulting outflows of economic benefits:-

Product WarrantyAccruals have been made in respect of warranties given by the Company for the sales made and services rendered during the year based on past experience.

Income Tax (Current tax)Tax payable to the Government in accordance with the provision of the Income Tax Act, 1961.

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27.a ) Details of Derivative Instruments (for hedging)

Nil

b ) Details of foreign currency exposures that are not hedged by a derivative instrument or otherwise:

Particulars Amount in Foreign Currency Equivalent amount in Indian Rupees

Liability

Sundry Creditors 4,027,985 JPY 2,094,552

(51,300,511) (20,658,716)

2,039,013 EUR 138,754,845

(819,395) (51,941,418)

18,148 GBP 1,334,288

(42,630) (3,409,527)

15,514,415 USD 793,717,492

(11,420,305) (456,926,413)

Loans 4,500,000 USD 230,220,000

(6,000,000) (240,060,000)

Advances received from Customers 1,363,369 EUR 92,777,285

(1,234,514) (78,255,874)

34,718 GBP 2,552,496

(15,569) (1,245,201)

5,580,638 USD 285,505,446

(4,170,624) (166,866,681)

Assets

Advances to Suppliers 2,778,196 EUR 186,083,573

(2,570,316) (160,361,997)

540,873 GBP 39,213,293

(301,551) (23,786,379)

3,750,249 USD 190,212,626

(1,761,221) (69,850,027)

92,243,078 JPY 47,043,969

(14,034,390) (5,651,649)

Sundry Debtors 2,547,164 EUR 170,609,018

(1,436,254) (89,607,911)

732,591 GBP 53,112,872

(672,606) (53,055,180)

6,185,707 USD 313,739,075

(12,218,041) (484,567,498)

Bank Accounts 998 EUR 66,862

(998) (62,281)

1,634,325 USD 8,334,555

(72,586) (2,878,744)

SCHEDULE 25: NOTES FORMING PART OF ACCOUNTS (CONTD.)

KIRLOSKAR BROTHERS LIMITEDth

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28. Stock Option Schemes

performance and other eligibility criteria. The Options are vested over a period of three years subject to the discretion of the management and fulfilment of certain conditions

b) The maximum term of ESOP is three years from the vesting date. The ESOP will be settled in the form of Equity Shares.

c) The details of the grants under the Stock Option Scheme are summarised below.

a) The grant of options to the employees under the Stock Option Schemes is on the basis of their

SCHEDULE 25: NOTES FORMING PART OF ACCOUNTS (CONTD.)

29. In accordance with the orders passed by the Honourable Board for Industrial and Financial Reconstruction (BIFR) on May 14, 2008, the Company has acquired all the Equity shares of Rs. 10/- each of The Kolhapur Steel Limited (TKSL) from the existing promoters by executing a Share Purchase Agreement on August 2, 2008 and TKSL has become a subsidiary company of KBL with effect from August 2, 2008.

30. The company, through its subsidiary company Kirloskar Brothers International B.V. , has formed a Company in The Netherlands, on May 13, 2008, namely, “ Kirloskar Brothers Europe B.V. " This is a joint venture company with a local partner, primarily for the distribution of the company’s products in Europe.

31. The company has formed a wholly owned subsidiary company in Thailand namely Kirloskar Brothers (Thailand) Ltd . As per the local laws, the company was permitted to commence business only after getting the approval from Board of Investments, Thailand, which was received in September 2008. The company would source the goods from India and cater to the South East Asian market.

32. The Board has approved the Scheme of Arrangement for transfer of some investments to a separate company. For this purpose, the Company has incorporated a wholly owned subsidiary company “ Kirloskar Brothers Investments Limited” on April 16, 2009.

33. The figures have been regrouped / rearranged wherever necessary. Figures in bracket relate to previous year.

Sr No Particulars 2008-09 2007-08

Grant I Grant II Grant I Grant II

1) Exercise Price - Rs. 200/- 200/- 200/- 200/-

2) Grant Date 31/8/2007 19/1/2008 31/8/2007 19/1/2008

3) Vesting Commences on 31/8/2008 19/1/2009 31/8/2008 19/1/2009

4) Options granted and outstanding at the beginning of the year 486,700 27,750 - -

5) Options granted during the year - - 520,200 32,050

6) Options lapsed during the year 38,285 5,450 32,950 4,300

7) Options exercised during the year - - - -

8) Option outstanding at the end of year 448,415 22,300 487,250 27,750

9) Options granted and outstanding at the end of the year of which

a Options Vested 135,715 6,690 550 -

b Options yet to Vest 312,700 15,610 486,700 27,750

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BALANCE SHEET ABSTRACT AND COMPANY'S GENERAL BUSINESS PROFILE(Inserted by Notification No. GSR 388 (E), dated 15.05.1995)

I Registration DetailsRegistration No. : 0 0 0 6 7 0 State Code 1 1

Balance Sheet Date 3 1 0 3 2 0 0 9

Date Month YearII Capital raised during the year ( Amount in Rs. Thousands )

Public Issue Rights Issue

Bonus Issue Private Placement

III Position of Mobilisation and Deployment of FundsTotal Liabilities Total Assets

Sources of FundsPaid up Capital Reserves & Surplus

Secured Loans Unsecured Loans

Employee Stock Options outstanding Deferred Taxes

Application of FundsNet Fixed Assets Investments

Net Current Assets Misc. Expenses

Accumulated Losses Intangible Assets

IV Performance of Company ( Amount in Rs. Thousands )Turnover Total Expenses

V Profit of Company ( Amount Rs. Thousands )

+ - Profit / Loss Before Tax + - Profit / Loss After Tax

+

(Please tick appropriate box + for Profit, - for Loss )Basic Earning per Share in Rs. Dividend Rate %

VI Generic Names of Three Principal Products / Services of Company(As per monetary terms)Item Code No. : (ITC Code)

Product Description :

Item Code No. :(ITC Code)

Product Description :

Item Code No. :(ITC Code)

Product Description :

-- --

-- --

1 0 3 6 0 8 2 6 1 0 3 6 0 8 2 6

2 1 1 5 2 8

1 8 0 8 6 6 2 1 3 9 5 6 8 3

9 2 0 6 8 6 5 0 8 6

2 7 5 6 0 7 0 3 3 8 3 7 5 0

4 2 1 1 0 6 1 --

-- 9 9 4 5

1 8 6 6 8 5 8 3 1 7 6 8 6 3 8 0

9 8 2 2 0 3 6 7 0 2 8 7

6 . 3 4 1 0 0

P U M P S F O R L I Q U I D S

V A L V E S

8 4 . 1 3

8 4 . 8 1

6 7 8 7 7 9 9

+

C O N S T R U C T I O N & P R O J E C T

N - A

R E L A T E D A C T I V I T Y

As per our report of even date attached For and on behalf of the Board of Directors For M/s P.G. BhagwatChartered Accountants SANJAY KIRLOSKAR S. N. INAMDAR

Chairman & Managing Director Director PANKAJA BHAGWAT G. P. KULKARNI A. R. SATHE Partner Company Secretary Vice President (Finance)PUNE : April 30, 2009 PUNE : April 30, 2009

85

KIRLOSKAR BROTHERS LIMITEDth

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STATEMENT PURSUANT TO SECTION 212 OF THE COMPANIES ACT, 1956RELATING TO SUBSIDIARY COMPANIES :

Names of the Pooja Credits Kirloskar Silk Kirloskar SPP Pumps Gondwana Kirloskar Subsidiaries Pvt. Limited Industries Constructions & Ltd. Engineers Brothers Steel Brothers

Limited Engineers (Consolidated) Ltd. International B.V. Limited (Thailand) Ltd. (Consolidated) Limited

1. The Financial year March 31, March 31, March 31, December 31, March 31, December 31, March 31, September 30, of the Subsidiary 2009 2009 2009 2008 2009 2008 2009 2008Companies ended on

2. Holding Company's Controls Controls Controls Controls Controls Controls Controls Controls interest composition of composition of composition of composition of composition of composition of composition of composition of

the Board and the Board and the Board and the Board and the Board and the Board and the Board and the Board and also owns 100% also owns 100% also owns 100% also owns 97.50% also owns 100% also owns 100% also owns 95.95% also owns 100%

of equity of equity of equity of equity of equity of equity of equity of equityshare capital share capital share capital share capital share capital share capital share capital share capital

3. Net aggregate amount of Subsidiary's Profits / (Losses) as far as it concerns members of the holding company not dealt with the Holding Company's accounts :

(i) Profit / (Loss) for the Subsidiary's financial year end Rs. 18,012,162 (10,432) (117,656,084) 113,182,461 23,582,387 (12,960,721) 10,642,752 (570,108)

(ii) Profits / (Losses) for

its previous financial years since becoming subsidiary. Rs. 157,553,498 (2,817,114) (22,378,908) 279,830,613 8,356,894 (442,080) - -

4. Net aggegate amount

of Subsidiary's Profits / (Losses) dealt with in the Holding Company's accounts :

(i) for the Subsidiary's financial year ended March 31, 2009 Nil* Nil Nil Nil Nil Nil Nil Nil

(ii) for its previous financial years Nil** Nil Nil Nil Nil Nil Nil Nil

* - except dividend Rs. 15,160,099 4,016,000

** - except dividend Rs. 50,820,786 - - - 401,600 - -

The Kolhapur Kirloskar

For and on behalf of the Board of Directors

SANJAY KIRLOSKAR S. N. INAMDAR Chairman & Managing Director Director

G. P. KULKARNI A. R. SATHE Company Secretary Vice President (Finance)

PUNE : April 30, 2009

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87

NOTES

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CONSOLIDATED FINANCIAL STATEMENTS

88

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CONSOLIDATED FINANCIAL STATEMENTS

Auditors' Report to the Board of Directors of Kirloskar Brothers Limited

We have audited the attached consolidated balance sheet of Kirloskar Brothers Limited (KBL) Group, as at 31st March, 2009 and also the consolidated profit and loss account and the consolidated cash flow statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the company's management and have been prepared by the management on the basis of separate financial statements and other financial information regarding components. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the generally accepted auditing standards in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

We did not audit the financial statements of certain subsidiaries, whose financial statements reflect total assets of Rs. 4,835.48 million as at 31st March, 2009, the total revenue of Rs. 6,295.24 million and cash inflows amounting to Rs. 335.15 million for the year then ended. These financial statements and other financial information have been audited by other auditors, whose report have been furnished to us and our opinion is based solely on the reports of other auditors. Our opinion in case of the unaudited financial statements of Kirloskar Brothers International B.V. Consolidated, has been based solely on the report of the management, whose financial statements reflect total assets of Rs. 17.29 million as at 31st March, 2009, the total revenue of Rs. 8.91 million and cash inflow amounting to Rs. 4.17 million for the year then ended. We have been informed that these financial statements are not legally subject to an audit.

We report that the consolidated financial statements have been prepared by the management in accordance with the requirements of Accounting Standard (AS) 21 - Consolidated Financial Statements, Accounting Standard (AS) 23 - Accounting for Investments in Associates in Consolidated Financial Statements and Accounting Standard (AS) 27 - Financial Reporting of Interests in Joint Ventures, prescribed by Companies (Accounting Standards) Rules, 2006.

Based on our audit and on consideration of report of other auditors on separate financial statements and on the other financial information of the components, and to the best of our information and according to explanations given to us, we are of the opinion that the attached consolidated financial statements give a true and fair view in conformity with the accounting principles generally accepted in India:

a) in the case of the consolidated balance sheet, of the state of affairs of KBL Group as at 31st March, 2009;

b) in the case of consolidated profit and loss account, of the profit for the year ended on that date; and

c) in the case of the consolidated cash flow statement, of the cash flows for the year ended 31st March, 2009.

For M/s P. G. BHAGWATChartered Accountants

Pankaja BhagwatPartner

Membership No. 86155

Pune : April 30, 2009

89

KIRLOSKAR BROTHERS LIMITEDth

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CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 2009

Schedule 2009 2008Rupees Rupees

SOURCES OF FUNDS :Shareholders' FundsCapital 1 211,528,710 211,528,710 Reserves and surplus 2 7,808,157,639 7,197,954,214 Employee Stock options outstandings 121,855,582 133,004,975Less: Deferred employee compensation expenses 29,787,458 88,970,333

92,068,124 44,034,642 8,111,754,473 7,453,517,566

Minority InterestCapital 9,909,588 3,984,745 Reserves and surplus 6,034,842 6,980,279 Total 15,944,430 10,965,024

Loan FundsSecured Loans 3 2,570,528,602 2,308,100,153 Unsecured Loans 4 1,411,094,590 354,248,353

3,981,623,192 2,662,348,506 Deferred Tax-net 5 78,924,501 90,444,732

Total 12,188,246,596 10,217,275,828

APPLICATION OF FUNDS :Fixed Assets 6Gross Block 4,996,671,173 4,032,191,487 Less: Depreciation and Impairment 1,787,578,999 1,480,594,509 Net Block 3,209,092,174 2,551,596,978 Capital work-in-progress including capital advances 713,776,203 327,847,746

3,922,868,377 2,879,444,724 Intangible Assets 7 Gross Block 101,403,688 94,433,936 Less: Amortization 83,890,175 72,506,468 Net Block 17,513,513 21,927,468 Assets under implementation including capital advances. 681,636 -

18,195,149 21,927,468

Goodwill 469,641,079 407,080,463 Investments a) Long Term Investments 2,767,284,707 2,935,012,979 b) Current Investments 9,000 9,000

2,767,293,707 2,935,021,979 Current Assets, Loans & AdvancesInventories 8 2,361,302,709 1,895,552,592 Gross amount due from customers for project related contract work 9 2,342,221,967 2,555,376,206 Sundry debtors 10 8,122,931,600 5,558,893,873 Cash and bank balances 11 531,989,334 856,296,765 Other current assets 12 861,641,635 338,734,410 Loans and advances 13 2,915,692,581 2,545,241,790

17,135,779,826 13,750,095,636 Less: Current Liabilities & Provisions

Current Liabilities 14 10,577,476,524 8,504,933,896 Gross amount due to customers for project related contract work 15 722,722,763 380,034,661 Provisions 16 826,426,604 892,576,321

12,126,625,891 9,777,544,878 Net Current Assets 5,009,153,935 3,972,550,758 Miscellaneous Expenditure (To the extent not written off or adjusted)Preliminary Expenses 1,094,349 1,250,436

Total 12,188,246,596 10,217,275,828 Notes to Accounts 24The schedules referred to above and the notes to accounts form an integral part of the Balance Sheet

As per our report of even date attached For and on behalf of the Board of Directors

For M/s P.G. BhagwatChartered Accountants SANJAY KIRLOSKAR S. N. INAMDAR

Chairman & Managing Director Director

PANKAJA BHAGWAT G. P. KULKARNI A. R. SATHE Partner Company Secretary Vice President (Finance)

PUNE : April 30, 2009 PUNE : April 30, 2009

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CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2009

Schedule 2009 2008

Rupees Rupees

INCOME

Sales 17 24,526,732,915 20,587,732,083

Other income 18 425,735,691 523,867,817

Total 24,952,468,606 21,111,599,900

EXPENDITURE

Materials consumed 19 17,748,090,313 14,503,667,611

Payments and benefits to employees 20 2,136,871,555 1,801,935,322

Operating and other expenses 21 3,065,673,103 2,497,544,497

Interest 22 410,687,696 233,115,475

Depreciation, amortization and impairment 300,541,016 244,090,967

23,661,863,683 19,280,353,872

Less: Expenses capitalized 4,927,376 3,333,861

Total 23,656,936,307 19,277,020,011

Profit/(Loss) before tax 1,295,532,299 1,834,579,889

Provision for tax 23 462,843,210 505,310,110

Profit/(Loss) after tax before prior year adjustments 832,689,089 1,329,269,779

Prior year Adjustments (22,503) -

Profit/(Loss) after tax after prior year adjustments 832,666,586 1,329,269,779

Less : Minority Share (1,577,791) 3,117,773

Add : Share in Profit of the Associate Companies 18,450,351 35,742,143

Balance brought forward from previous year 433,076,040 396,500,788

Profit available for appropriation 1,285,770,768 1,758,394,937

Appropriations

Proposed dividend 233,528,710 443,607,420

Additional tax on dividend 42,947,185 75,459,334

Transfer to General Reserve 486,532,765 770,510,000

Transferred to retained earnings of Associate Companies 18,450,351 35,742,143

Surplus carried to Balance Sheet 504,311,757 433,076,040

1,285,770,768 1,758,394,937

Basic Earnings per Equity Share ( Refer Note No.8 ) 8.06 12.85

Diluted Earnings per Equity Share ( Refer Note No.8 ) 8.06 12.81

Notes to Accounts 24

The schedules referred to above and the notes to accounts

form an integral part of Profit and Loss Account.

As per our report of even date attached For and on behalf of the Board of Directors

For M/s P.G. BhagwatChartered Accountants SANJAY KIRLOSKAR S. N. INAMDAR

Chairman & Managing Director Director

PANKAJA BHAGWAT G. P. KULKARNI A. R. SATHE Partner Company Secretary Vice President (Finance)

PUNE : April 30, 2009 PUNE : April 30, 2009

KIRLOSKAR BROTHERS LIMITEDth

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CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2009

2009 2008Rupees Rupees

A. Cash flow from operating activities

Net profit before taxation and extraordinary items 1,295,532,299 1,834,579,889

Adjustments for

Depreciation, amortization and impairment 300,541,016 244,090,967

Transfer from Capital Reserve (8,536,041) (8,536,041)

Employees Stock Option debited to Profit & Loss A/c ( Net ) 48,033,482 44,034,642

Loss/(profi)t on sale of fixed assets (289,133) (4,243,790)

(Profit)/loss on sale of investments (102,841) 2,537

Unrealized foreign exchange loss/(gain) 34,994,020 (7,690,513)

Provision for doubtful debts and advances 88,295,586 18,793,006

Provision for diminution in value of investments 25,399 -

Interest income (107,478,221) (116,603,888)

Dividend income (147,025,574) (168,944,501)

Excess provision written back (3,857,905) (717,753)

Prior period expenditure (22,503) -

Sundry irrecoverable balances written off 222,843 795,736

Interest expenses 410,687,696 230,832,055

Operating profits before working capital changes 1,911,020,123 2,066,392,346

(Increase)/decrease in trade and other receivables (3,355,486,948) (2,976,976,813)

(Increase)/decrease in inventories (432,393,375) (442,453,723)

Increase/(decrease) in sundry creditors 2,601,134,516 2,545,438,097

Cash generated from operations 724,274,317 1,192,399,907

Income tax paid (444,358,176) (519,172,290)

Net cash from operating activities 279,916,141 673,227,617

B. Cash flow from investing activities

Purchase of fixed assets (1,265,449,743) (952,663,724)

Proceeds from sale of fixed assets 5,965,932 8,145,474

(Purchase)/Sale of investments 92,905,551 (126,383,847)

Interest received 107,337,545 114,649,307

Dividend received 147,427,174 168,944,501

Advance to subsidiaries (115,374,375) (16,678,639)

Net cash from investing activities (1,027,187,916) (803,986,928)

C. Cash flow from financing activities

Proceeds from issuance of Share Capital 6,201,873 -

Proceeds from issuance of Share Capital from Joint Venturer 5,512,776 -

(Repayment)/proceeds of / from long term borrowings (net) 715,113,173 417,596,144

(Repayment)/proceeds of / from other borrowings (net) 609,712,633 472,140,122

Interest paid (404,835,778) (213,696,033)

Dividend paid (433,303,422) (216,217,857)

Tax on dividend paid (77,610,919) (37,343,710)

Net cash used in financing activities 420,790,336 422,478,666

Net increase in cash and cash equivalents (326,481,439) 291,719,355

Cash and cash equivalents at the beginning of the year 856,296,765 543,186,974

Add : Due to acquisition of subsidiary 2,174,008 21,390,436

Sub Total 858,470,773 564,577,410

Cash and cash equivalents at the end of the year 531,989,334 856,296,765

As per our report of even date attached For and on behalf of the Board of Directors

For M/s P.G. BhagwatChartered Accountants SANJAY KIRLOSKAR S. N. INAMDAR

Chairman & Managing Director Director

PANKAJA BHAGWAT G. P. KULKARNI A. R. SATHE Partner Company Secretary Vice President (Finance)

PUNE : April 30, 2009 PUNE : April 30, 2009

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SCHEDULE TO THE CONSOLIDATED ACCOUNTS2009 2008

Rupees RupeesSCHEDULE 1 : SHARE CAPITALAuthorized250,000,000 (250,000,000) equity shares of Rs.2/- (Rs.2/-) each 500,000,000 500,000,000 500,000,000 500,000,000 Issued105,907,030 (105,907,030) equity shares of Rs.2/- (Rs.2/-) each 211,814,060 211,814,060

Subscribed and paid up 105,764,355 (105,764,355) equity shares of Rs.2/- (Rs.2/-) each 211,528,710 211,528,710

53,207,342 (52,694,805) shares of Rs.2/- (Rs.2/-) each are held by BetterValue Holdings Pvt. Limited, the holding Company.

211,528,710 211,528,710 SCHEDULE 2 : RESERVES AND SURPLUSCapital Reserve Balance as per last account 19,124,057 10,588,016 Add : Increase on account of acquisition of subsidiary - 17,072,082 Less : Transfer to Profit & Loss Account (Refer Note No. 3 I a) 8,536,041 8,536,041

10,588,016 19,124,057 (Includes Rs. 4,701,504/- (4,701,504/-) on the acquisition of Associate Companies and Rs. 73,419/-(73,419/-) on acquisition of interest in a joint venture Co.)

Capital Redemption Reserve 6,625,000 6,625,000

Share Premium Account 395,881,752 395,881,752

General ReserveBalance as per last account 6,137,775,615 5,419,523,069

Less : Liabilities on account of Employee Benefits [net of Deferred Tax] - 52,257,454

Add: Transfer from Profit and Loss Account 486,532,765 770,510,000 6,624,308,380 6,137,775,615

Profit and Loss Account 504,311,757 433,076,040

Aggregate Share in Retained Earnings of Associate Companies Balance as per last account 210,837,495 175,095,352 Add : Transferred from Profit and Loss Account 18,450,351 35,742,143

229,287,846 210,837,495

Foreign Exchange Translation Reserve Balance as per last account (5,365,745) 18,016,840

Addition / (Deduction) for the year 42,520,633 (23,382,585)37,154,888 (5,365,745)

7,808,157,639 7,197,954,214 SCHEDULE 3 : SECURED LOANSLoans and advances from banks Cash/Export Credit facilities 1,979,440,328 1,307,606,658 [Secured by hypothecation of tangible movable assets and

book debts of the company]

Term Loan Secured by hypothecation of Vehicles purchased out of this loan 178,080 445,200

1,979,618,408 1,308,051,858

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Rupees RupeesOther loans and advances i) From Bank of India 10,714,835 14,867,372

ii) From EXIM Bank 145,454,548 518,909,092 iv) From Indian Overseas Bank 266,764,788 298,901,782 [Secured by way of hypothecation of movable fixed assets and mortgage of immovable properties of the company ( both present and future). Loan from ICICI (Secured by fixed and floating charge of assets) 167,976,023 167,370,049

2,570,528,602 2,308,100,153 SCHEDULE 4 : UNSECURED LOANS

Interest free loan under Sales Tax Deferral Scheme 70,874,590 64,188,353 Inter Corporate Deposits 40,000,000 50,000,000 Short term Loans and advances

a) Packing Credit in Foreign Currency from Citi Bank N. A. 230,220,000 240,060,000 b) from Bank of India 670,000,000 - c) from Calyon Bank 400,000,000 -

1,411,094,590 354,248,353 SCHEDULE 5 : DEFERRED TAX-NET Deferred Tax Liabilities On depreciation/amortization of fixed assets 228,334,326 192,441,249 On preliminary expenses 52,469 275,492

228,386,795 192,716,741 Deferred tax assets On employees voluntary retirement schemes 441,770 5,697,416 On provision for doubtful debts/advances 49,809,661 23,465,461 Provision for leave encashment and pension 87,371,187 48,155,695 Other timing differences 11,839,676 24,953,437

149,462,294 102,272,009 78,924,501 90,444,732

SCHEDULE 6 : FIXED ASSETS

Land Free/ Buildings Railway Plant & Furniture & Vehicles Total Previous Lease Hold Siding Machinery Fittings Year

Gross BlockAt 01.04.2008 297,000,939 585,797,244 1,523,341 2,881,074,520 164,583,235 102,212,208 4,032,191,487 3,206,070,803 Additions / Assets Acquired 18,180,620 300,564,325 52,474 639,165,531 24,955,347 18,089,904 1,001,008,201 853,645,757 Deductions - 1,622,885 - 25,523,244 2,701,459 6,680,927 36,528,515 27,525,073

At 31.03.2009 315,181,559 884,738,684 1,575,815 3,494,716,807 186,837,123 113,621,185 4,996,671,173 4,032,191,487

Depreciation/AmortisationAt 01.04.2008 - 109,740,051 1,400,932 1,215,857,929 86,109,945 67,485,652 1,480,594,509 1,264,013,919 For the year includingon Assets Acquired - 25,634,507 35,026 284,560,986 17,135,598 7,450,094 334,816,211 240,203,981 Recouped - 709,529 - 24,003,270 1,772,262 3,846,660 30,331,721 23,623,391

At 31.03.2009 - 134,665,029 1,435,958 1,476,415,645 101,473,281 71,089,086 1,785,078,999 1,480,594,509

Provision for Impairment - - - 2,500,000 - - 2,500,000 -

Net BlockAt 31.03.2009 315,181,559 750,073,655 139,857 2,015,801,162 85,363,842 42,532,099 3,209,092,174 2,551,596,978

Assets under Erection 713,776,203 327,847,746 including Capital Advances

At 31.03.2009 315,181,559 750,073,655 139,857 2,015,801,162 85,363,842 42,532,099 3,922,868,377 2,879,444,724

At 31.03.2008 297,000,939 476,057,193 122,409 1,665,216,591 78,473,290 34,726,556 2,551,596,978

Notes : 1. Building includes cost of hangars jointly owned with other companies2. In respect of Fixed Assets, assets acquired includes Rs. 108,920,719/- and depreciation for the year on assets acquired includes Rs. 48,158,901/- on account

of the opening block as on 02.08.2008 of the company acquired during the year namely, The Kolhapur Steel Limited.

(In Rupees)

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2009 2008Rupees Rupees

SCHEDULE 7 : INTANGIBLE ASSETS

Gross Block

At 01.04.2008 94,433,936 75,917,765

Additions 6,969,752 18,516,171

Deductions - -

At 31.03.2009 101,403,688 94,433,936

Amortization

At 01.04.2008 72,506,468 61,962,522

For the year 11,383,707 10,543,946

Recouped - -

At 31.03.2009 83,890,175 72,506,468

Net Block as at 31.03.2009 17,513,513 21,927,468

Assets under implementation including capital advances. 681,636 -

18,195,149 21,927,468

SCHEDULE 8 : INVENTORIES

Raw materials and components 796,478,622 765,430,425

Stores and spares 77,561,299 50,242,172

Work-in-progress 1,078,591,403 741,438,138

Finished goods 408,671,385 338,441,857

2,361,302,709 1,895,552,592

SCHEDULE 9 : GROSS AMOUNT DUE FROM CUSTOMERS

FOR PROJECT RELATED CONTRACT WORK

Cost incurred plus recognized profits less recognized losses 27,713,307,445 21,976,100,154

Less: Progress billing 25,371,085,478 19,420,723,948

2,342,221,967 2,555,376,206

SCHEDULE 10 : SUNDRY DEBTORS

Debts outstanding for a period exceeding six months

Unsecured, considered good 1,994,337,305 1,345,416,668

Considered doubtful 162,571,039 77,901,211

Other debts

Unsecured, considered good 6,128,594,295 4,213,477,205

8,285,502,639 5,636,795,084

Less: Provision for doubtful debts 162,571,039 77,901,211

8,122,931,600 5,558,893,873

SCHEDULE TO THE CONSOLIDATED ACCOUNTS (CONTD.)

KIRLOSKAR BROTHERS LIMITEDth

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2009 2008Rupees Rupees

SCHEDULE 11 : CASH AND BANK BALANCES

Cash on hand 6,246,551 5,121,729

Balances with schedule banks

On current accounts 484,101,848 634,165,462

On escrow account - 5,964,338

On deposit accounts 41,459,439 210,215,010

Balances with other banks On current accounts 181,496 830,226

531,989,334 856,296,765

SCHEDULE 12 : OTHER CURRENT ASSETS

Interest accrued on investments 42,477,338 43,107,981

Claims receivable 819,164,297 295,626,429

861,641,635 338,734,410

SCHEDULE 13 : LOANS AND ADVANCES

Unsecured considered good

Advances recoverable in cash or kind or for value to be received 2,156,985,327 1,919,923,460

Considered doubtful 10,083,848 9,438,871

Balances with customs, excise, etc. 15,008,114 15,938,544

Deposits with post & others 714,523,139 542,693,816

Advance Income tax (net of Provision for tax) 29,176,001 66,685,970

2,925,776,429 2,554,680,661

Less: Provision 10,083,848 9,438,871

2,915,692,581 2,545,241,790

SCHEDULE 14 : CURRENT LIABILITIES

Acceptances 81,637,916 92,874,073

Sundry Creditors 7,399,336,308 5,767,446,962

Advances and deposits from customers 2,660,238,515 2,292,851,543

Investor Education and Protection Fund shall be credited by the following amounts namely:

(a) Unpaid dividend 44,783,912 36,581,329

(b) Unpaid Matured Deposits 913,000 1,149,500

Other liabilities 361,106,943 289,209,439

Interest accrued but not due on loans 29,459,930 24,821,050

10,577,476,524 8,504,933,896

SCHEDULE 15 : GROSS AMOUNT DUE TO CUSTOMERS

FOR PROJECT RELATED CONTRACT WORK

Progress billing 7,364,837,239 2,536,757,699

Less: Cost incurred plus recognized profits less recognized losses 6,642,114,476 2,156,723,038

722,722,763 380,034,661

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2009 2008Rupees Rupees

SCHEDULE 16 : PROVISIONS

Proposed dividend 233,528,710 441,107,420

Additional tax on dividend 40,370,725 75,034,458

Provision for product warranties 77,993,171 57,114,712

Provision for leave encashment 242,876,367 230,324,725

Provision for Pension Benefits 30,115,369 16,999,644

Other provisions 201,542,262 71,995,362

826,426,604 892,576,321

SCHEDULE 17 : SALES AND CONTRACT REVENUE

Sales (Gross) 14,624,994,996 13,671,436,001

Less: Excise duty recovered 651,949,696 610,211,303

13,973,045,300 13,061,224,698

Construction and project related revenue 10,553,687,615 7,526,507,385

24,526,732,915 20,587,732,083

SCHEDULE 18 : OTHER INCOME Income from investments

Interest from long term investments 104,899,523 111,826,924

Dividend income

(a) Trade investment 144,182,568 206,241,733

(b) Other investments - Current 2,731,115 572,795

(c) Other investments - Long term 111,891 76,403

Profit on sale of current investments 102,841 -

Other Interest 2,578,698 5,706,797

Profit on sale of fixed assets 3,803,309 6,580,117

Royalty received 1,334,443 2,660,769

House rent 752,868 577,337

Recovery of bad debts 51,449,253 84,798,511

Agency Commission - 198,056

Miscellaneous income 105,253,141 96,092,334

Transfer from capital reserve (Refer Note No.3 I a) 8,536,041 8,536,041

425,735,691 523,867,817

SCHEDULE 19 : MATERIALS CONSUMED

Raw materials consumed 13,087,603,929 11,189,996,348

Stores and spares consumed 450,357,510 393,582,895

Processing charges 634,228,206 364,257,160

Purchase of traded goods 3,951,783,319 2,815,166,719

18,123,972,964 14,763,003,122

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2009 2008Rupees Rupees

(Increase)/Decrease in stocks

Opening stock

Work-in-progress 764,937,489 490,323,335

Finished goods 346,442,648 330,221,149

1,111,380,137 820,544,484

Closing stock

Work-in-progress 1,078,591,403 741,438,138

Finished goods 408,671,385 338,441,857

1,487,262,788 1,079,879,995

(375,882,651) (259,335,511)

17,748,090,313 14,503,667,611

SCHEDULE 20 : PAYMENTS AND BENEFITS TO EMPLOYEES

Salaries, wages and bonus 1,853,547,674 1,570,615,596

Payment under Voluntary Retirement Schemes 2,811,710 490,000

Contribution to provident fund and E.S.I. 201,738,829 169,947,666

Gratuity 5,607,291 (30,958)

Welfare expenses 68,830,530 64,607,564

Pension Benefits 4,335,521 (3,694,546)

2,136,871,555 1,801,935,322

SCHEDULE 21 : OPERATING AND OTHER EXPENSES

Power & fuel 203,382,123 166,128,697

Repairs and maintenance

Plant and machinery 118,923,335 136,855,941

Buildings 39,685,028 41,941,049

Rent 121,754,595 118,096,058

Rates and taxes 13,184,176 10,257,482

Travel and conveyance 354,219,850 330,285,601

Postage and telephone 76,733,581 80,131,737

Insurance 156,135,466 145,765,139

Directors' sitting fees 1,038,150 854,700

Directors' remuneration 64,373,469 56,949,190

Royalties and fees 48,376,810 35,063,478

Cash discount 31,971,149 18,815,801

Freight and forwarding charges 288,896,152 244,954,398

Brokerage and commission 281,882,883 218,359,513

Advertisements and publicity 83,400,188 113,759,195

Product Warranty 45,232,716 32,626,272

Excise duty paid 15,995,473 36,761,641

Bank charges 164,805,855 138,781,372

Loss on sale/disposal of fixed assets 3,514,177 2,394,101

Loss on disposal of investments - 2,537

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2009 2008Rupees Rupees

Bad debts written off 9,099,367 6,774,221

Provision for doubtful debts and advances 88,198,223 18,793,005

Provision for decline in value of investments 25,399 -

Donations 10,642,033 15,376,076

Preliminary expenses written off 156,087 156,086

Other miscellaneous expenses 844,046,818 527,661,207

3,065,673,103 2,497,544,497

SCHEDULE 22 : INTEREST

Interest

On fixed loans and debentures 129,222,612 72,187,602

On other loans 281,465,084 160,927,873

410,687,696 233,115,475

SCHEDULE 23 : PROVISION FOR TAX

Income tax for the year

Current 449,533,946 473,063,588

Deferred (10,953,746) 16,603,717

Fringe Benefit Tax 24,174,580 18,683,140

Adjustments for earlier year/s 88,430 (3,040,335)

462,843,210 505,310,110

KIRLOSKAR BROTHERS LIMITEDth

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SCHEDULE 24 : A ACCOUNTING POLICIES

1. Principles of Consolidation

(i) The consolidated financial statements relate to Kirloskar Brothers Limited (KBL) and

a) its majority owned subsidiary companies, consolidated on a line by line basis by adding together the book values of like items of assets, liabilities, income and expenses, after fully eliminating intra-group transactions and the unrealised profit/ losses on intra-group transactions, and are presented to the extent possible, in the manner as the Company's independant financial statements.

The names of the subsidiary companies, Country of Incorporation, Proportion of Ownership Interest and reporting dates considered in the Consolidated Financial Statements are:

Name of the Company Country of Proportion of Reporting DateIncorporation Ownership Interest of

KBL

Pooja Credits Private Limited India 100% 31st March, 2009

Kirloskar Silk Industries Limited India 100% 31st March, 2009

Kirloskar Constructions and Engineers Ltd. India 100% 31st March, 2009

SPP Pumps Ltd. UK (Consolidated Financial Statements) UK 97.5% 31st December, 2008

Gondwana Engineers Limited India 100% 31st March, 2009

Kirloskar Brothers International B.V

(Consolidated Financial Statements) @ The Netherlands 100% 31st December, 2008

The Kolhapur Steel Limited

(from 02.08.2008) @@ India 95.95% 31st March, 2009

Kirloskar Brothers (Thailand) Limited

(from 26.09.2008) @@@ Thailand 100.00% 30th September 2008

@The Company's subsidiary company, Kirloskar Brothers International B.V. , has formed a subsidiary in The Netherlands namely “Kirloskar Brothers Europe B. V" on 13th May, 2008.

@@ In accordance with the orders passed by the Honourable Board for Industrial and Financial Reconstruction (BIFR) on May 14, 2008, the Company has acquired all the Equity shares of Rs. 10/- each of The Kolhapur Steel Limited (TKSL) from the existing promoters by executing a Share Purchase Agreement on August 2, 2008 and TKSL has become a subsidiary company of KBL with effect from August 2, 2008.

@@@ The Company has formed a wholly owned subsidiary company in Thailand namely Kirloskar Brothers (Thailand) Limited. As per the local laws, the company was permitted to commence business only after getting the approval from Board of Investments, Thailand, which was received in September, 2008.

The excess of cost to the Company of its investment in the subsidiary company over the parents' portion of equity is recognised in the consolidated financial statements as goodwill. The excess of Company's share of equity of the subsidiary company over the cost of acquisition is treated as capital reserve.

b) Its jointly controlled joint venture companies by using proportionate consolidation method which means the consolidated Balance Sheet of KBL includes its share of assets that it controls jointly and its share of liabilities for which it is jointly responsible and the consolidated statement of Profit & Loss of KBL includes its share of the income and expenses of its joint venture companies. Under this method, separate line items of KBL's share of the assets, liabilities, income and expenses of joint venture companies are included in its consolidated financial statements.

NOTES FORMING PART OF THE CONSOLIDATED ACCOUNTS

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Name of the Company Country of Incorporation Ownership Interest of

KBL

Kirloskar Ebara Pumps Limited India 45%

Kirloskar Corrocoat Pvt. Limited India 50%

Share of the assets and liabilities of the above joint venture companies considered for proportionate consolidation :

Particulars Kirloskar Ebara Kirloskar Corrocoat

Pumps Limited Pvt. Limited

Sources of Funds

Reserves & Surplus 354,912,457 42,569,499

Secured Loans 12,087,658 12,336,396

Un-secured Loans 8,218,243 -

Deferred Tax (Net) 8,233,357 1,634,253

Application of Funds

Fixed Assets 161,688,034 43,312,241

Intangible Assets 2,901,987 17,098

Investments 36,636,536 -

Current Assets 332,218,546 71,581,675

Current Liabilities 147,743,389 34,465,216

Net Current Assets 184,475,157 37,116,459

Miscellaneous Expenditure

(to the extent not written off) - 1,094,349

Share of the income and expenses of the above joint venture companies considered for proportionate consolidation :

Particulars Kirloskar Ebara Kirloskar Corrocoat Pumps Limited Pvt. Limited

Income

Sales and Other Income 577,083,045 151,320,186

Expenditure

Materials consumed 285,901,967 77,343,676

Payments and benefits to employees 41,624,672 7,967,432

Operating and other expenses 68,888,008 22,995,002

Interest 594,409 1,803,613

Depreciation and amortization 13,632,248 2,415,785

Provision for Tax 57,939,213 13,467,025

The jointly controlled joint venture companies considered in the consolidated financial statements are :

Proportion of

KIRLOSKAR BROTHERS LIMITEDth

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c) Icompanies. Under this method investment is increased or decreased to recognise KBL's share of profits or losses of the associate companies after the date of acquisition. Distributions received from the associate companies reduce the carrying amount of investments. Where an associate company presents a consolidated financial statement the results and the net assets taken into account are those reported in the associate's consolidated financial statements.

The associate companies considered in the consolidated financial statements :

Name of the company Proportion of Ownership

Interest of KBL

Hematic Motors Pvt. Limited

(consolidated financial statements) 50%

Pressmatic Electrostampings Pvt. Limited 50%

Quadromatic Engineering Pvt. Limited 40.38%

Share of profits and losses of associate companies considered in the consolidated profit and loss account :

Name of the company Share of Profit/(Loss) Rs.

Hematic Motors Pvt. Limited 4,983,245

Pressmatic Electrostampings Pvt. Limited 13,566,332

Quadromatic Engineering Pvt. Limited (99,226)

Total 18,450,351

2 Other Accounting Policies :

a) They are set out in the notes to accounts of the parent company - Kirloskar Brothers Limited.

b) The financial statements of all Indian subsidiaries, associates and joint venture companies have been prepared to comply in all material respects with The Companies (Accounting Standards) Rules, 2006 and the relevant provisions of the Companies Act, 1956 and those of the foreign subsidiaries have been prepared in compliance with the local laws and applicable Accounting Standards.

c) Foreign Currency Transactions

The operations of the foreign subsidiary are not considered as an intergral part of the operations of the parent company. Hence, all monetory and non monetory assets and liabilities have been translated at the exchange rate prevailing as on 31st March 2009.

Income and expenditure have been translated at the average rate of the exchange prevailing for the subsidiary's financial year. Gains and losses arising out of the translation are carried to " Foreign Exchange Translation Reserve."

3 Accounting policies other than those adopted by the parent company for the consolidated financial statements :

I. Subsidiary Companies

a) SPP Pumps Limited (Consolidated):

Goodwill: On the acquisition of subsidiaries, the purchase consideration is allocated between the underlying assets on the basis of the fair value. The difference between the value of the net assets acquired and the purchase price is created as positive or negative goodwill on consolidation. Goodwill arising on acquisitions is capitalised and amortised over its economic life. Negative goodwill is released to the Profit & Loss account in the periods in which the fair value of the non-monetary assets purchased on the same acquisition are recovered, whether through depreciation or sale. For consolidated accounts of Kirloskar Brothers Limited the above refered "Negative Goodwill" is disclosed as Capital Reserve. The proportion of such negative goodwill credited to the profit & loss account to the profit for the year in the consolidated statement is 0.64% (0.46%).

ts associate companies by using equity method for accounting for KBL's investment in its associate

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b) Gondwana Engineers Ltd:

i) Provision for Long term benefits-leave encashment :

Leave encashment is accounted at the time of payment as against the basis of actuarial valuation followed by the Parent Company. The proportion of such provision in the consolidated statement is Nil (Nil) as there is no charge to the Profit and Loss account for the year.

ii) Provision for Defined benefit Plan-Gratuity:

As against the basis of actuarial valuation as at the year end followed by the parent company, the liability is accounted for in the year of accrual as covered by Employees Group Gratuity Scheme of Life Insurance Corporation of India. The annual premium is charged to the Profit & loss account.The proportion of such provision in the consolidated statement is 0.05%. (0.05%).

iii) Depreciation:

Depreciation on fixed assets is provided on Written Down Value method as against Straight Line Method followed by the Parent Company. The proportion of such depreciation in the consolidated statement is 0.30% (0.29%).

II Joint Venture Companies

a) Kirloskar Ebara Pumps Limited

i) Work-in-Progress, raw materials, stores, spares and tools are valued at 'Cost' as against 'Cost or Net Realisable value whichever is lower', followed by the parent company. The proportion of such inventory in the consolidated statement is 4.39% (5.38%).

ii) Intangible Asset: - Technical Knowhow fees, is amortised on Straight Line Method over the term of agreement as against on Straight Line Method over a period of three years. The proportion of such amortisation in the consolidated statements is 6.49% (4.67%).

III Associate Companies

In all Associate Companies

i) Depreciation on fixed assets is provided on Written Down Value method as against Straight Line Method followed by the Parent Company.

ii) Provision for Long term benefits-leave encashment :

As against the basis of actuarial valuation followed by the parent company, provision is made on actual basis for accumulated leave balance at the year end. In case of a subsidiary of Hematic Motors Pvt. Limited the provision is accounted for in the year in which the option of encashment is exercised by the employees.

iii) Provision for Defined benefit Plan-Gratuity:

As against the basis of actuarial valuation as at the year end followed by the parent company, the liability is accounted for in the year of accrual as covered by Employees Group Gratuity Scheme of Life Insurance Corporation of India. The additional amount, if any, payable at the time of pre-mature retirement is accounted for in the year of retirement.

KIRLOSKAR BROTHERS LIMITEDth

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B OTHER NOTES

1)as the current year's figures :

I) Include results of the operations of The Kolhapur Steel Ltd. from 2nd August, 2008 to 31st March, 2009 pursuant to its acquisition.

II) Include results of the operations of Kirloskar Brothers (Thailand) Ltd. from 26th September, 2008 to 30th September, 2008 pursuant to its formation.

III) Include results of the operations of Gondwana Engineers Ltd. from 1st April, 2008 to 31st March, 2009 as against the period from 10th September, 2007 to 31st March, 2008 in the previous year.

IV) Include results of the operations of Kirloskar Brothers International B.V.,The Netherlands (consolidated) from 1st January, 2008 to 31st December, 2008 as against Kirloskar Brothers International B.V.,The Netherlands (standalone) from 30th August, 2007 to 31st December, 2007. Kirloskar Brothers International B.V. , has formed a subsidiary company “ Kirloskar Brothers Europe B.V" on 13th May, 2008.

2) The effect of acquisition and formation of subsidiary companies:

The acquistion of The Kolhapur Steel Ltd. and formation of Kirloskar Brothers (Thailand) Ltd. and Kirloskar Brothers Europe B.V. has resulted in :

I) an increase of Rs. 17,311,221/- (Previous year Rs. 69,500,884/-) in the financial position as on 31st March, 2009 as compared to 31st March,2008.

II) an increase of Rs. 2,383,403/- (Previous year Rs.7,914,814/- ) in group profit net of minority interest for the year ended on 31st March, 2009 as compared to the year ended on 31st March, 2008.

III) The Kolhapur Steel Ltd was acquired for a consideration of Rs.93,843,591/-. Goodwill of Rs.62,560,616/- is recognised in the consolidated financial statements being the excess of consideration paid over the equity of Rs. 31,282,975/- as on the date of acquisition.

3) Kirloskar Silk Industries Ltd.

The company has approached The Development Commissioner, Mumbai, the appropriate authority, seeking change in the usage of land instead of silk manufacturing. In view of the above, the Board of Directors has decided to pursue the said application and hence defer the decision of disposal of land and existing business.

4) Contingent liabilities not provided for in respect of : 2009 2008Rupees Rupees

a) Guarantees:

By the company to ICICI Bank Ltd. on behalf SPP Pumps Ltd. UK 147,040,000 159,960,000

By the company to Barclays Bank Ltd. on behalf SPP Pumps Ltd. UK 294,080,000 319,920,000

By the company to Citi Bank N A on behalf SPP Pumps Ltd. UK 588,160,000 639,840,000

By the company to Indian Overseas Bank Ltd. on behalf of

Kirloskar Constructions and Engineers Ltd. 800,000,000 500,000,000

By the company to Bank of Maharashtra on behalf of

Gondwana Engineers Limited 145,000,000 -

b) Central Excise (Matter Subjudice) 14,347,263 4,482,000

c) Sales Tax (Matter Subjudice) 89,056,373 103,895,118

d) Income Tax (Matter Subjudice) 395,323,477 1,490,064

e) Labour Matters (Matter Subjudice) 39,278,282 35,320,699

f) Other Legal Cases (Matter Subjudice) 18,792,301 27,725,000

g) Letters of Credit Outstanding 2,366,640,832 1,284,654,309

The figures for the year ended March 31, 2009 are not comparable with that of the previous year

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2009 2008

Rupees Rupees

5) Estimated amount of contracts remaining to be

executed on capital account and not provided for 190,563,183 569,628,437

6) Construction Contracts:

a) Contract revenue recognised as revenue for the

year ended 31st March, 2009 10,553,687,615 8,221,983,664

b) The aggregate amount of contract costs incurred and recognised

profits (less recognised losses) upto 31st March, 2009 34,355,421,921 23,428,515,276

c) Amount of advances received as on 31st March, 2009

for contracts in progress 1,305,754,671 1,087,500,034

d) Amount of retentions as on 31st March, 2009

for contracts in progress 603,382,520 304,283,698

7) Related Party Disclosures :

A) Name of the related party and nature of relationship where control exists

Name of the related party Nature of relationship

1. Better Value Holdings Pvt. Ltd. Holding Company

2. Pooja Credits Pvt. Ltd. Subsidiary Company

3. Kirloskar Silk Industries Ltd. Subsidiary Company

4. Kirloskar Constructions and Engineers Ltd. Subsidiary Company

5. Gondwana Engineers Ltd Subsidiary Company

6. Kirloskar Brothers International B. V. Subsidiary Company

7. The Kolhapur Steel Limited (from 02.08.2008) Subsidiary Company

8. Kirloskar Brothers Europe B. V. (from 13.05.08) Subsidiary Company of Kirloskar Brothers International B V

9. Kirloskar Brothers (Thailand) Ltd. (from 26.09.08) Subsidiary Company

10. SPP Pumps Ltd. U K. Subsidiary Company

11. SPP Pumps France EURL Subsidiary of SPP Pumps Ltd. U K

12. Certified Engines Ltd. Subsidiary of SPP Pumps Ltd. U K

13. SPP (South Africa) (Pty) Ltd. Subsidiary of SPP Pumps Ltd. U K

14. SPP Pumps LP Subsidiary of SPP Pumps Ltd. U K

15. SPP France S A S Subsidiary of SPP Pumps Ltd. U K

16. SPP Pumps Management LLC Subsidiary of SPP Pumps Ltd. U K

17. SPP Pumps Holdings LLC Subsidiary of SPP Pumps Ltd. U K

18 . Hematic Motors Pvt. Ltd. Fellow Subsidiary Company

19.Pressmatic Electro Stampings Pvt. Ltd. Fellow Subsidiary Company

20. Quadromatic Engineering Pvt. Ltd. Fellow Subsidiary Company

21. Vakasa Electricals Pvt. Ltd.. Fellow Subsidiary Company

22. Moreshwar Electricals Pvt. Ltd.. Fellow Subsidiary Company

23. Ila Electricals Pvt. Ltd.. Fellow Subsidiary Company

24. Kirloskar Oil Engines Limited Fellow Subsidiary Company

25. Kirloskar Pneumatic Company Limited Fellow Subsidiary Company

26. Kirloskar Systems Limited Fellow Subsidiary Company

27. Kirloskar Proprietary Limited Fellow Subsidiary Company

KIRLOSKAR BROTHERS LIMITEDth

105

Page 108: Annual Report 2008-09

1) Purchases of Goods - 70,669,193 445,293,240 - - - 515,962,433

- (279,014,797) - - - - (279,014,797)

2) Sale of Goods - 1,227,601 5,131,072 - - - 6,358,673

- (751,975) - - - - (751,975)

3) Rendering of Services - 11,769,810 7,034,441 - - - 18,804,251

- (17,878,322) - - - - (17,878,322)

4) Receiving of Services - - 5,849,512 450,000 2,610,000 - 8,909,512

- (564,989) - - (2,820,000) (450,000) (3,834,989)

5) Dividend Received - 18,050,000 107,853,748 - - - 125,903,748

- (9,119,700) - - - - (9,119,700)

6) Dividend Paid 211,625,340 - 630,000 5,217,216 256,400 - 217,728,956

- (210,000) - (3,652,598) (124,200) (105,389,610) (109,376,408)

7) Interest Paid - - 2,854,795 - - - 2,854,795

- (665,754) - (235,000) (464,000) - (1,364,754)

8) Remuneration Paid - - - 54,450,136 530,000 - 54,980,136

- - - (50,287,533) (1,272,601) - (51,560,134)

9) Deposits Accepted - - - - - - -

- (50,000,000) - (1,400,000) - - (51,400,000)

10) Deposits Repaid - - - - - - -

- - - (3,231,000) (5,150,000) - (8,381,000)

11) Sale of Fixed Assets - - - - - - -

- (181,600) - - - - (181,600)

12) Reimbursement of Expenses - 5,548,635 8,499,133 - - - 14,047,768

- (2,714,059) - - - - (2,714,059)

13) Deposit paid - - - 1,700,000 3,400,000 5,100,000

- - - - - (5,000,000) (5,000,000)

14) Repayment of Inter Corporate Deposit - - 20,000,000 - - - 20,000,000

- - - - - - -

15) Royalty Paid - - 47,137,925 - - - 47,137,925

- - - - - - -

16) Royalty Received - - 1,334,443 - - - 1,334,443

- - - - - - -

17) Inter Corporate Deposit Received - - 10,000,000 - - - 10,000,000

- (50,000,000) - - - - (50,000,000)

18) Balance Outstanding Debit (Credit) - (3,543,242) (134,412,695) (23,300,000) 3,400,000 - (157,855,937)

- (119,052,086) - (21,500,000) 3,510,000 5,248,345 (131,793,741)

SCHEDULE 24 : NOTES FORMING PART OF THE CONSOLIDATED ACCOUNTS (CONTD.)

B) Related Party Transactions (In Rupees)

Nature of Transaction Holding Associates & Fellow Key Relatives Enterprises TotalCompany Joint Ventures Subsidiary Management of Key over which

Companies Personnel Management key managerialPersonnel personnel or

their relativesexercise

significant influence

106

Page 109: Annual Report 2008-09

SCHEDULE 24 : NOTES FORMING PART OF THE CONSOLIDATED ACCOUNTS (CONTD.)

C) Names of Related Parties

1) Holding Company Better Value Holdings Pvt. Ltd.

2) Subsidiary Companies Pooja Credits Pvt. Ltd.

Kirloskar Constructions and Engineers Ltd.

Kirloskar Silk Industries Ltd.

Gondwana Engineers Ltd.

Certified Engines Ltd.

SPP Pumps Ltd., UK

SPP (South Africa) (Pty) Ltd.

SPP Pumps LP

SPP Pumps Management LLC

SPP Pumps Holdings LLC

SPP Pumps France EURL

SPP France S A S

Kirloskar Brothers International B. V.

The Kolhapur Steel Limited (From 02.08.2008)

Kirloskar Brothers Europe B. V. (From 13.05.2008)

Kirloskar Brothers (Thailand) Ltd. (From 26.09.2008)

3) Fellow Subsidiary Companies Hematic Motors Pvt. Ltd.

Pressmatic Electro Stampings Pvt. Ltd.

Quadromatic Engineering Pvt. Ltd.

Vakasa Electricals Pvt. Ltd.

Moreshwar Electricals Pvt. Ltd.

Ila Electricals Pvt. Ltd.

Kirloskar Oil Engines Limited

Kirloskar Pneumatic Company Limited

Kirloskar Sytems Ltd.

Kirloskar Proprietary Limited

4) Joint Ventures Kirloskar Ebara Pumps Ltd.

Kirloskar Corrocoat Pvt. Ltd.

5) Key Management Personnel Mr. Sanjay Kirloskar

Mr. Vikram Kirloskar

Mr. R. K.Srivastava

Mr. J. R. Sapre

6) Relatives of Key

Management Personnel Mrs. Pratima Kirloskar Wife of Mr. S. C. Kirloskar

Mr. Alok Kirloskar Son of Mr. S. C. Kirloskar

Ms. Rama Kirloskar Daughter of Mr. S. C. Kirloskar

Mrs. Suman Kirloskar Mother of Mr. S. C. Kirloskar

Mr. Atul Kirloskar Brother of Mr. S. C. Kirloskar

Mr. Rahul Kirloskar Brother of Mr. S. C. Kirloskar

Mrs. Geetanjali Kirloskar Wife of Mr. Vikram Kirloskar

Mrs. Mrinalini Kirloskar Mother of Mr. Vikram Kirloskar

Mrs. Vijayalaxmi Srivastava Wife of Mr. R. K. Srivastava

Mrs. Asha J. Sapre Wife of Mr. J. R. Sapre

KIRLOSKAR BROTHERS LIMITEDth

107

Page 110: Annual Report 2008-09

SCHEDULE 24 : NOTES FORMING PART OF THE CONSOLIDATED ACCOUNTS (CONTD.)

8) Earning per Share (Basic and diluted)

2009 2008

I - Basic Rupees Rupees

Profit for the year before tax 1,315,537,938 1,867,204,259

Less : Attributable tax thereto 462,754,780 508,350,445

Profit after tax 852,783,158 1,358,853,814

Total Number of equity shares at the end of the year

used as denominator 105,764,355 105,764,355

Basic earning per share of nominal value of Rs. 2/- each 8.06 12.85

II - Diluted

Profit for the year before tax 1,315,537,938 1,867,204,259

Less : Attributable tax thereto 462,754,780 508,350,445

852,783,158 1,358,853,814

Total Number of equity shares at the end of the year 105,764,355 105,764,355

Add : Weighted average number of potential equity

shares on account of employee stock options - 277,615

Weighted average number of shares outstanding

used as denominator 105,764,355 106,041,970

Diluted earning per share of nominal value of Rs 2/- each 8.06 12.81

9. Particulars related to Joint Ventures :

List of Joint Ventures

Name of the Joint Venture Description Country of

Incorporation

Kirloskar Ebara Pumps Ltd. Jointly controlled entity India

Kirloskar Corrocoat Pvt. Ltd. Jointly controlled entity India

HCC – KBL Joint Venture - Jointly controlled operations India

KBL – MCCL Joint Venture Jointly controlled operations India

KCCPL – IHP – BRC – TAIPPL – KBL JV Jointly controlled operations India

IVRCL – KBL JV Jointly controlled operations India

Maytas – KBL JV Jointly controlled operations India

Larsen & Toubro – KBL JV Jointly controlled operations India

KBL-MEIL-KCCPL JV Jointly controlled operations India

KBL – PLR JV Jointly controlled operations India

KBL – Koya – VA Tech JV Jointly controlled operations India

KBL – PIL Consortium Jointly controlled operations India

Larsen & Toubro – KBL – Maytas JV Jointly controlled operations India

IVRCL – KBL – MEIL JV Jointly controlled operations India

Pioneer – Avantica – ZVS – KBL JV Jointly controlled operations India

AMR – Maytas – KBL – WEG JV Jointly controlled operations India

Indu – Shrinivasa Constructions – KBL – WEG JV Jointly controlled operations India

MEIL – Maytas – KBL JV Jointly controlled operations India

MEIL – KBL – IVRCL JV Jointly controlled operations India

MEIL – Maytas – KBL JV Jointly controlled operations India

KCCPL – TAIPPL – KBL JV Jointly controlled operations India

Aban-Coastal Joint Venture Jointly controlled operations India

Asian Techs Ltd.- ABCI Infrastructures (P) Ltd Jointly controlled operations India

10. Figures of the previous year have been regrouped/rearranged wherever necessary. Figures in bracket relate to the previous year.

108

Page 111: Annual Report 2008-09

SCHEDULE 24 : NOTES FORMING PART OF THE CONSOLIDATED ACCOUNTS (CONTD.)11 Segment Information in respect of KBL and its Subsidiaries and Joint Venture Companies

(A) Primary Segments - Business Segments Pumps Others Eliminations Total AmountRupees Rupees Rupees Rupees

a) Segment Revenue

Sales to External Customers 22,243,496,210 2,283,236,705 - 24,526,732,915

(18,815,021,072) (1,772,711,011) - (20,587,732,083)

Inter Segment Revenue 5,075,202 758,888,261 763,963,463 -

(2,813,763) (166,439,724) (169,253,487) -

Total Segment Revenue 22,248,571,412 3,042,124,967 763,963,463 24,526,732,915

(18,817,834,835) (1,939,150,735) (169,253,487) (20,587,732,083)

b) Segment Result 1,717,483,434 217,442,113 1,934,925,548

(1,966,947,042) (190,946,678) (2,157,893,720)

Less :

I) Interest 410,687,696

(233,115,475)

II) Unallocable Corporate expenditure

(net of other income) 455,567,106

(398,815,601)

Add :

I) Income from Investments 226,861,554

(308,617,246)

Total Profit Before Tax 1,295,532,299

(1,834,579,889)

Less : Provision for Tax 449,622,376

(470,023,253)

Less : Deferred Tax (10,953,746)

(16,603,717)

Less : Fringe Benefit Tax 24,174,580

(18,683,140)

Net Profit 832,689,089

(1,329,269,779)

c) Segment Assets 17,298,071,057 2,110,653,969 - 19,408,725,026

(13,563,016,082) (2,037,483,135) (15,600,499,217)

Unallocable Corporate Assets 4,906,147,461

(4,899,153,868)

Total 24,314,872,487

(15,841,653,444)

d) Segment Liabilities 10,802,739,621 1,542,347,051 - 12,345,086,672

(8,301,854,730) (1,445,979,435) (6,535,817,595)

Unallocable Corporate Liabilities 3,562,043,897

(3,287,336,329)

Total 15,907,130,569

(9,199,650,332)

e) Cost Incurred during the period to

acquire Segment Fixed Assets 613,699,193 387,309,009

(422,665,254) (430,980,503)

f) Depreciation / Amortisation/Impairment 219,556,297 80,984,718

(188,854,371) (55,236,596)

g) Non Cash Expenses other than 154,573,239 21,122,367

Depreciation / Amortisation (24,481,390) (2,351,704)

B) Secondary Segment - Domestic Export Total Rupees Rupees Rupees

a) Segment Revenue Geographic Segment 19,448,498,310 5,078,234,605 24,526,732,915

by location of customer (16,793,237,485) (3,794,494,598) (20,587,732,083)

b) Carrying Amount of Segment Assets by location of assets 23,537,614,676 777,257,811 24,314,872,487

(19,643,309,115) (856,343,971) (20,499,653,086)

c) Cost Incurred during the period to 984,242,992 16,765,209 1,001,008,201

acquire Segment Fixed Assets (844,665,704) (8,980,053) (853,645,757)

KIRLOSKAR BROTHERS LIMITEDth

109

Page 112: Annual Report 2008-09

NOTES

110

Page 113: Annual Report 2008-09

As many of you are aware, the Kirloskar Group

began large-scale operations with Kirloskar Brothers

Limited's flagship plant in Kirloskarvadi in 1910.

From pioneering India's agricultural success-story

with innovative products like the iron plough to being

the acknowledged leader in engineering solutions

globally, the brand 'Kirloskar' has come a long way.

Having made a difference to the lives of millions worldwide, your Company has brought growth and prosperity across

continents. Celebrating 2009-10 as the centenary year of this remarkable journey, we look forward to transforming fortunes.

This is the legacy of the Kirloskar Group. This is the legacy we will build on.

Page 114: Annual Report 2008-09

KIRLOSKAR BROTHERS LIMITED

Regd. Office : Udyog Bhavan, Tilak Road, Pune - 411 002. (INDIA)Tel.:+91 20 2444 0770 Fax:+91 20 2440 2083

E-mail : [email protected] Website: www.kbl.co.in Prin

ted

at V

ikra

m P

rin

ters

Pvt

. L

td.

Page 115: Annual Report 2008-09

KIRLOSKAR BROTHERS LIMITEDRegistered Office : Udyog Bhavan, Tilak Road, Pune - 411 002

Dear Shareholders,thSub: Corrigendum to 89 Annual Report 2008-09

Please refer to the enclosed Annual Report 2008-09 of the Company. We draw your attention to the second paragraph on the page No. 4 of the same.

As you are aware, on February 2, 2009, the company made an application to the Central Government under section 212(8) of the Companies Act, 1956 for exemption from attaching the annual accounts of the subsidiary companies.

However, since the approval was pending with the Government till date, we were to provide separately the respective annual accounts and other documents of subsidiary companies.

We are pleased to inform you that on June 17, 2009 the Government of India, Ministry of Corporate Affairs vide letter No. 47/120/2009-CL-III, granted its approval under section 212(8) of the Companies Act, 1956 for the year ended March 31, 2009.

As per the said approval, instead of the annual accounts of the subsidiary companies, we attach certain information in respect of company's subsidiaries for the financial year ended March 31, 2009 / December 31, 2008 / September 30, 2008 and for the corresponding previous year ended March 31, 2008 / December 31, 2007.

Further, we hereby undertake that annual accounts for the subsidiary companies and the related detailed information will be made available to the Shareholders, seeking such information. The annual accounts of the subsidiary companies will also be kept open for inspection for Shareholders.

thThis communication forms a part of the company's 89 annual report-2008-09.

For KIRLOSKAR BROTHERS LIMITED,

G. P. KULKARNIVice President & Head - Legal

Pune : June 19, 2009 and Company Secretary

Page 116: Annual Report 2008-09

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tem

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30,

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d fo

r th

e co

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po

nd

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pre

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us

year

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Par

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2

Page 117: Annual Report 2008-09

KIRLOSKAR BROTHERS LIMITEDth

No

te 1

:

Det

ails

of I

nve

stm

ents

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79.

69

No

tes

:

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ccor

danc

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ith th

e or

ders

pas

sed

by th

e H

onou

rabl

e B

oard

for I

ndus

tria

l and

Fin

anci

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econ

stru

ctio

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IFR

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as a

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all t

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quity

sha

res

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s. 1

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ach

of T

he K

olha

pur S

teel

Lim

ited

(TK

SL)

from

the

exis

ting

prom

oter

s by

exe

cutin

g a

Sha

re P

urch

ase

Agr

eem

ent o

n A

ugus

t 2,

2008

and

TK

SL

has

beco

me

a su

bsid

iary

com

pany

of K

BL

with

effe

ct fr

om A

ugus

t 2, 2

008.

The

com

pany

, thr

ough

its

subs

idia

ry c

ompa

ny K

irlos

kar B

roth

ers

Inte

rnat

iona

l B.V

. , h

as fo

rmed

a C

ompa

ny in

The

Net

herla

nds,

on

May

13,

200

8, n

amel

y, “

Kirl

oska

r Bro

ther

s E

urop

e B

.V. "

Thi

s is

a jo

int v

entu

re c

ompa

ny w

ith a

loca

l par

tner

, pr

imar

ily fo

r the

dis

trib

utio

n of

the

com

pany

’s p

rodu

cts

in E

urop

e.

The

com

pany

has

form

ed a

who

lly o

wne

d su

bsid

iary

com

pany

in T

haila

nd n

amel

y K

irlos

kar B

roth

ers

(Tha

iland

) Ltd

. As

per t

he lo

cal l

aws,

the

com

pany

was

per

mitt

ed to

com

men

ce b

usin

ess

only

afte

r get

ting

the

appr

oval

from

Boa

rd o

f Inv

estm

ents

, Tha

iland

, w

hich

was

rece

ived

in S

epte

mbe

r 200

8.

Par

ticu

lars

Po

oja

Cre

dit

s P

vt. L

td.

Kir

losk

ar S

ilk In

du

stri

es L

td.

Kir

losk

ar C

on

stru

ctio

ns

Go

nd

wan

aT

he

Ko

lhap

ur

Kir

losk

ar B

roth

ers

Kir

losk

ar B

roth

ers

SP

P P

um

ps

Lim

ited

& E

ng

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rs L

td.

En

gin

eers

Lim

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Ste

el L

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( Th

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nd

) L

td.

In

tern

atio

nal

B. V

. (C

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solid

ated

(Co

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lidat

ed F

inan

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tem

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)F

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Sta

tem

ents

)

As

at M

arch

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s at

Mar

ch

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er

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at D

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s at

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emb

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s at

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emb

erA

s at

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emb

er31

, 200

931

, 200

831

, 200

931

, 200

831

, 200

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, 200

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, 200

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, 200

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, 200

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, 200

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, 200

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3

Page 118: Annual Report 2008-09

a

n

f

n

This

pge

is

ite

ntio

nally

let b

lak