Kirloskar Pneumatic Company Ltd

Dear Shareholders,

It is both an honor and a privilege to address you, providing an overview of our performance for the financial year 2024 and outlining our strategic direction for the upcoming year.

Performance Overview FY 2024

The fiscal year 2024 posed notable challenges for us. While we observed robust growth in domestic sales, our exports, amounting to _69 Crore, fell by nearly _100 Crore compared to the previous year. Consequently, our overall sales growth was moderate, reaching _1,323 Crore, reflecting a 7% increase from the preceding year.

On the profitability front, our EBITDA margins improved to 16% from 14% in the previous year, resulting in a profit before tax of _178 Crore, marking a significant rise of almost 24% from the previous year. This improvement stems from our focused efforts on cost optimisation.

Strategic Focus on In-House R&D and New Product Development

Our relentless focus on in-house research and development has been fundamental to our success. In FY 2024, we substantially augmented our investment in R&D to foster innovation and maintain a competitive edge. Our R&D teams have been diligently engaged in developing new and enhanced products that align with the evolving needs of our customers. As a result of these endeavors, we filed as well as received / granted in aggregate 25 IPs during the year. In addition to this, we established a partnership with PDC Machines LLC USA to package their Diaphragm Compressors for various hydrogen compression applications, positioning us to cater effectively to the burgeoning hydrogen market in India with globally leading solutions.

As we progress into FY 2025, we are intensifying our efforts in new product development, aiming to introduce a range of cutting-edge products that not only address current demands but also anticipate future trends and requirements. This strategic focus aims to enrich our product portfolio, ensuring we remain at the forefront of technological advancements in our industry.

Transition to Product-Based Sales

A pivotal strategic initiative for the near term is our transition towards selling more individual products rather than engineered packages. This shift is designed to mitigate the lumpiness in our business and provide a more stable and predictable revenue stream. By emphasising product-based sales, we aim to align our offerings with market demand, ensure greater flexibility, and enhance our ability to serve a broader customer base.

Nasik Factory: A Step Towards Backward Integration

The establishment of our new facility in Nasik signifies a significant milestone in our journey towards backward integration. This state-of-the-art factory underscores our commitment to operational excellence and strategically enhances our production capabilities. By internalising more manufacturing processes, we aim to expedite deliveries and capture greater value addition within our operations.

Equipped with advanced manufacturing technologies, the Nasik factory empowers us to produce critical components internally, reducing dependency on external suppliers and enhancing overall supply chain efficiency. This backward integration is poised to play a pivotal role in supporting our growth objectives and delivering superior value to our customers and stakeholders.

Committed to Employee Well-being

Recognised as an organisation that values its people, we prioritise the well-being of our teams, investing in their holistic development and fostering a culture of diversity and inclusion. Our goal is to create a dynamic workplace environment where every employee feels appreciated and motivated, thereby inspiring them to perform their best.

During the year, KPCL is honored to be recognised as a 2023 Kincentric National Best Employer Award winner. This prestigious award stands as a testament to our continued efforts to provide the best environment for our employees.

Sustainability at Our Core

As a responsible corporate, we are steadfast in meeting our obligations to the planet. Our focus on environmental stewardship rests on five key pillars, i.e., energy efficiency, emission reduction, water conservation, responsible waste management and biodiversity preservation. By adhering to these principles, we aim to contribute positively to environmental sustainability while simultaneously driving our business forward.

Looking Ahead

The global economy is transitioning into a new phase amidst ongoing geopolitical tensions and uncertainties. The initial scramble to diversify gas supplies has stabilised, creating a more balanced and resilient global market. This stability empowers businesses to plan and focus on sustainable development while leveraging emerging opportunities.

Given our India-centric approach, KPCL stands to benefit from the immense potential in our domestic market, supported by robust macroeconomic tailwinds. As India invests in key infrastructure such as gas pipelines and industries undergo expansion with increased capital expenditure, we anticipate stable demand growth in the domestic market.

As we look ahead to FY 2025, we remain steadfast in our strategic priorities, driving innovation through R&D, expanding our product offerings and optimising our operations through backward integration. We are confident that these initiatives will sustain our growth momentum, enhance our competitive edge and deliver long-term value to our shareholders.

The Board of Directors, subject to the approval of shareholders, has recommended a final dividend of H4, which is 200% of the face value, bringing the total dividend for the year to H6.50, which is 325% of the face value.

In closing, I extend my gratitude to our dedicated employees, loyal customers and valued shareholders for their unwavering support and trust in Kirloskar Pneumatic. Together, we will navigate the challenges and seize the opportunities that lie ahead.

Thank you for your continued commitment to our company.

Sincerely,

Rahul C Kirloskar

Executive Chairman