Kirloskar Oil Engines Ltd

TO THE MEMBERS

OF KIRLOSKAR OIL ENGINES LIMITED

The Directors are pleased to present the 15th Annual Report together with the Audited Statement of Accounts for the year ended 31st March 2024 of Kirloskar Oil Engines Limited ("KOEL" or the "Company").

1. COMPANY'S FINANCIAL PERFORMANCE (STANDALONE)

Your Company posted sales of H 4,806.35 Crore, an increase of 18% as compared to the previous year of H 4,073.04 Crore. Profit before tax and exceptional item was H 486.84 Crore as against H 364.14 Crore in the previous year.

The Profit After Tax was H 361.63 Crore as against H 270.25 Crore in the previous year.

2. FINANCIAL RESULTS (STANDALONE)

H in Crore

*Previous year numbers have been regrouped to make them comparable with Financial Year 2023-24.

3. DIVIDEND

The Directors have declared an interim dividend of 125% (H 2.50/-per share) and also recommended a final dividend of 175% (H3.50/- per share) for the year ended 31st March 2024. (Previous Year Interim Dividend 125%, H 2.50/- per share and Final Dividend 125%,

H 2.50/- per share).

Total dividend payout during the Financial Year was H 72.44 Crore. The payment of dividend was subject to deduction of TDS at the applicable tax rate.

In terms of Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 including amendments thereunder, the Dividend Distribution Policy of the Company is available on the Company's website (https://www.kirloskaroilengines. com/documents/541738/0a36d92a-4450-1010-8a11-d92ec5426c7c).

4. DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS

Pursuant to SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, (the Regulations) including amendments thereunder:

1. Details of Key Financial Ratios of the Company as under:

* Calculated in accordance with the Guidance Note issued on Division II - Ind AS Schedule III of the Companies Act, 2013 issued by ICAI.

There are no sector specific equivalent ratios for disclosure by the Company.

2. Return on Net Worth:

Details of change in Return on Net Worth as compared to the immediately previous Financial Year as follows:

5. COMPANIES WHICH HAVE BECOME OR CEASED TO BE SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES i. During the year under review, Kirloskar Americas Corporation, USA, had acquired 51% stake of Engines LPG, LLC dba Wildcat Power Gen, on 29th November 2023. Engines LPG, LLC dba Wildcat Power Gen is engaged in the business of designing, manufacturing, selling and servicing of generators powered by gas, diesel, other environmental fuel/power solution under the brand name of Wildcat Power Gen for all types of applications. This acquisition is step towards business expansion and to enable market development in Powergen applications for the North American markets.

Pursuant to the said acquisition, Engines LPG, LLC dba Wildcat Power Gen has become a step_down subsidiary of the Company and subsidiary of KAC with effect from 29th November 2023.

ii. Optiqua Pipes and Electricals Private Limited (OPEPL/Transferor Company) and La-Gajjar Machineries Private Limited (LGM/ Transferee Company) have approved the Scheme of Amalgamation in their respective meetings of Board, Shareholders and Creditors. This Scheme has been further approved by the Regional Director, Ahmedabad (North Western Region) on 22nd March 2024. OPEPL and LGM had filed the order copy issued by Regional Director, Ahmedabad (North Western Region) with Ministry of Corporate Affairs / Registrar of Companies, Ahmedabad, Gujarat on 26th March 2024 which was the effective date of said Scheme. Pursuant to the said approval, OPEPL amalgamated with LGM and consequently OPEPL ceased to be step down subsidiary of the Company.

iii. The Board of Directors in its meeting held on 6th March 2024 considered and has approved the incorporation of a wholly owned subsidiary in UAE with a name Kirloskar International ME FZE, or such other name as may be approved by the Statutory Authority(ies) therein and subject to such other approvals as may be required. The Company is in process of incorporation of the new subsidiary in UAE.

6. SUBSIDIARY COMPANY AND CONSOLIDATED FINANCIAL STATEMENTS

On consolidated basis for the year ended 31st March 2024, your Company posted Revenue from Operations of H 5,898.32 Crore

(Previous year H5,023.80 Crore), Profit before tax and exceptional item was H 610.53 Crore (Previous year H 448.93 Crore) and Profit After Tax was H 439.70 Crore (Previous year H 331.65 Crore).

The consolidated financial statements of the Company and its subsidiaries, prepared in accordance with Ind AS 110, issued by Ministry of Corporate Affairs, forms part of this Annual Report. A statement containing the salient features of the financial statements of the subsidiary company forms part of the Financial Statements of the Company in Form AOC-1. Refer Note 42 to the standalone financial statements.

Pursuant to the provisions of Section 136 of the Companies Act, 2013 & Rules thereof including amendments thereunder, the financial statements along with relevant documents of the Company and its subsidiary are available on the Company's website.

The annual accounts of the subsidiary and related detailed information will be available for inspection in electronic form based on the members' request raised by them on the dedicated email id of the Company at investors@kirloskar.com.

*OPEPL got amalgamated into LGM as per the scheme of amalgamation and post merger the transferee company (i.e.LGM) has restated the comparative figures of its financial statements as required under Appendix C of Ind AS 103 and as stated in the accounting policy.

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

***Numbers reported pertain only to post acquisition period i.e. w.e.f. 29th November 2023 upto 31^st March 2024

During the year under review, KAC's revenue contributed from Firefighting Engines, Industrial and Power Generation. With reference to Environment Protection Agency (EPA) certification of engines, there were no new families that achieved certification during the year under review. Three (3) new families of the R550 series are in process of Tier 4 Final certification from US EPA and California Air Resources Board (CARB) and this is expected to be completed in Financial Year 2024-25. KAC expects business to grow in the Power Generation & Firefighting segments.

During the year under review, KAC had acquired 51% stake of Engines LPG, LLC dba Wildcat Power Gen, an Ohio Limited Liability Company based at PO Box 12234, Wichita, KS 67277 United State of Americas.

Engines LPG LLC is engaged in the business of designing, manufacturing, selling and servicing of generators powered by gas, diesel, other environmental fuel/power solution under the brand name of Wildcat Power Gen for all types of applications. With the investment of Kirloskar Americas Corporation in November 2023, the business began to turn as the overall focus changed from customization to volume production with product standardization. The end of the year saw an overall increase in output with increased product availability, standardized build instructions, and new production layout for increased efficiencies.

During Financial Year 2022-23, the Board of Directors of LGM considered the proposal to purchase new land situated in Sanand GIDC, Ahmedabad, Gujarat, for its long-term strategy of consolidation of all the manufacturing facilities of LGM. Accordingly, LGM has purchased the land and the project of consolidation of all the manufacturing facilities of LGM is in process. This project is funded through a combination of long term bank borrowings, unsecured loan from parent company and internal accruals.

LGM continued to expand its network both in domestic and international markets and geographies. In this Financial Year, LGM has expanded its network in countries like Mexico,

Israel, Lebanon, Uzbekistan and Uganda and achieved total export sales of H 175.2 Crore. LGM continued to expand its footprint in the new potential regions like South Africa, South East Asia, Latin America. LGM continued to focus on quality standards.

AFHPL was founded with the aim of bolstering strategic flexibility to establish a dynamic and robust platform for its financial services endeavors. Presently, AFHPL oversees two subsidiaries viz. Arka Fincap Limited and Arka Investment Advisory Services Private Limited. During the year under review AFHPL allotted 3,60,48,524 equity shares of face value of H 10/- each to Kirloskar Oil Engines Limited.

AFL is a Non-Deposit Taking Systemically Important Non-Banking Financial Company (NBFC). It operates as a subsidiary of Arka Financial Holdings Private Limited (AFHPL), which, in turn, is a subsidiary of Kirloskar Oil Engines Limited (KOEL). AFL is professionally managed and specializes in providing structured term financing solutions to Corporate, Real Estate, and Micro, Small, and Medium Enterprise (MSME) borrowers. AFL's growth strategy hinges on robust digital credit assessment and efficient digital onboarding processes, ensuring faster Turnaround Time (TAT) and expedited disbursements. Aligned with its mission of providing technology-enabled, innovative, and customized financial solutions for an enhanced customer experience, AFL considers technology as the key driver for business expansion.

With a customer-centric approach, a seasoned management team, and diligent monitoring of loan assets, AFL has witnessed growth since the inception of operations in fiscal 2020. It operates in four main business segments: MSME/SME/Retail, Corporate lending, Real estate and urban infrastructure financing, Syndication.

MSME/SME/Retail business witnessed robust growth in Financial Year 2024 with Retail AUM now accounting for ~50% of the overall Arka book. AUM grew to H 2,613 Crore in Financial Year 2024 from H 1,134 Crore in Financial Year 2023. This is in line with the long-term strategy of focusing on the retail business. Significant growth was registered in all the sub-products including Loan against Property, Business Loans and Digital Partnerships. With 31 active branches, Arka is rapidly expanding its geographical presence with an aim to build a granular & diversified loan book without compromising asset quality. It has also been granted Corporate Agency license (Composite) by IRDAI essential for insurance distribution.

Corporate Lending division excels in tailoring bespoke loans to precisely fit the unique needs of medium and large corporations. It specializes in delivering customized financial solutions that address the diverse funding needs of companies across a broad spectrum of industries. From pharmaceuticals to renewable energy, power to telecom, entertainment to industrials, auto components, and beyond, it is committed to providing the perfect financing solutions to its clients.

The Real Estate and Urban Infra Lending division is dedicated to facilitating the growth of India's infrastructure and real estate sectors by providing either partial or complete capital infusion. With a keen focus on catering to the requirements of its esteemed clients, the division ensures a smooth and seamless process from initiation to completion.

Within AFL, the Syndication business offers comprehensive solutions to corporate clients encompassing project finance, capital expenditure, general corporate needs, last mile financing, and subordinated structured debt. Through advisory, syndicating, sell-down, and co-lending strategies spanning various sectors, it ensures tailored financial assistance for every requirement. Syndication efforts play a pivotal role in nurturing and strengthening investor and client relationships, fostering trust and reliability.

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

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

7. KIRLOSKAR OIL ENGINES LIMITED – EMPLOYEE STOCK OPTION PLAN 2019 (KOEL ESOP 2019) –

The members of the Company at the Annual General Meeting of Kirloskar Oil Engines Limited held on 9th August 2019, passed a resolution for introducing Employees Stock Option Plan 2019 – (KOEL ESOP 2019), for the benefit of employees of the Company. The resolution also accorded approval to the Board of Directors, to formulate the plan as per broad parameters outlined in the resolution, either directly or through a Nomination and Remuneration Committee.

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

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

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

The Nomination and Remuneration Committee at its meetings held on 5th March 2021 approved the grant of 9,40,000 stock options exercisable into 9,40,000 Equity Shares of H 2/- each, on 18th May 2022 approved the grant of 2,75,000 stock options exercisable into 2,75,000 Equity Shares of H 2/- each and on 10th August 2023 approved the grant of 1,35,000 stock options exercisable into 1,35,000 Equity Shares of H 2/- each of the Company to its specified employees of the Company. Further the Nomination and Remuneration Committee at its meeting held on 27th October 2021, approved the grant of 50,000 stock options exercisable into 50,000 Equity Shares of H 2/- each of the Company to the specified employees of La-Gajjar Machineries Private Limited, a wholly owned subsidiary company.

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

The disclosures as required under Companies (Share Capital and Debentures) Rules, 2014, including amendments thereunder as on 31st March 2024 is as under:

* 8,375 options were vested to the specified employees of La-Gajjar Machineries Private Limited, a wholly owned subsidiary company and 2,11,895 options were vested to the specified employees of the Company as per vesting schedule.

**It includes 40,159 options exercised during the Financial Year 2023-24 and allotted during the Financial Year 2024-25. The exercise money for 40,159 equity shares is accounted as Share application money.

***It includes 4837 options exercised during the Financial Year 2022-23 and alloted during the Financial Year 2023-24.

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

The certificate from Mr. Mahesh J. Risbud, Practicing Company Secretary [PCS No. 185] Secretarial Auditors of the Company, confirming that the scheme has been implemented in accordance with the aforesaid regulations and in accordance with the resolution passed by the Members of the Company at its Annual General Meetings held on 9th August 2019 and 12th August 2021, will be placed before the Members at the ensuing Annual General Meeting. A copy of the same will be available for inspection at the Company's website viz. www.kirloskaroilengines.com.

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

In line with the Indian Accounting Standards ("Ind AS") 102 on ‘Share Based Payments' issued by the Institute of Chartered Accountants of India ("ICAI"), your Company has computed the cost of equity settled transactions by using the fair value of the options at the date of the grant and recognized the same as employee compensation cost over the vesting period.

8. CAPITAL STRUCTURE

The Company allotted 2,12,169 equity shares of H 2/- each to the eligible employees of the Company and eligible employees of La-Gajjar Machineries Private Limited during the Financial Year 2023-24 pursuant to KOEL ESOP 2019. Consequent to the aforesaid allotment, Issued Capital and Subscribed Capital of the Company was increased from 14,47,44,102 equity shares of H 2/- each to 14,49,56,271 equity shares of H 2/- each and Paid-up Capital was increased from 14,47,43,637 equity shares of H 2/- each to 14,49,55,806 equity shares of H 2/- each.

The Company allotted 41,689 equity shares of H 2/- each on 19th April 2024, upon exercise of options vested to the eligible employees of the Company pursuant to KOEL ESOP 2019.

9. CHANGE IN THE NATURE OF BUSINESS

There was no change in nature of the business of the Company during the Financial Year 2023-24.

During the year under review,

i. In compliance with Section 149, 152, 197 and other applicable provisions, if any of Companies Act, 2013 (the "Act"), including rules thereof and Regulation 17(1C) and other applicable provisions, if any of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, ("SEBI LODR") (including any statutory modification(s) or re-enactment thereof for the time being in force), based on the recommendation of the Nomination and Remuneration Committee, the Board of Directors of the Company re-appointed Mr. Atul Kirloskar (DIN 00007387) as the Chairman and Non-Executive Director of the Company with effect from 1st April 2024 for a term of 2 (two) year, whose term of office as Chairman and Non-Executive Director of the Company ended on 31st March 2024. The members of the Company approved the said re-appointment by way of Postal Ballot on 24th April 2024.

ii. The Members of the Company in the Annual General Meeting held on 11th August 2023, had approved the appointment of Mr. Arvind Goel (DIN 02300813) as "Non-Executive Independent Director" for a first term of 5 (five) consecutive years with effect from 19th May 2023.

iii. In compliance with Section 149 and 152 read with Schedule IV and other applicable provisions, if any, of the Companies Act, 2013 and the Rules made thereunder and Regulation 16(1)(b), 17 (1C), 25(2A) and 25(8) including such other applicable provisions of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, (including any statutory amendment, modification(s) or re-enactment thereof for the time being in force) based on the recommendation of the Nomination and Remuneration Committee, the Board of Directors of the Company re-appointed Mr. Kandathil Mathew Abraham (DIN 05178826) as "Non-Executive Independent Director" with effect from 10th August 2024. The Company has received requisite notice in writing from a member proposing his candidature for office of Director. The resolution seeking approval of the Members by special resolution for the re-appointment of Mr. Kandathil Mathew Abraham for a second term of 5 consecutive years, has been incorporated in the notice of the forthcoming Annual General Meeting of the Company.

iv. In compliance with Section 149 and 152 read with Schedule IV and other applicable provisions, if any, of the Companies Act, 2013 and the Rules made thereunder and Regulation 16(1)(b), 17 (1C), 25(2A) and 25(8) including such other applicable provisions of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, (including any statutory amendment, modification(s) or re-enactment thereof for the time being in force) based on the recommendation of the Nomination and Remuneration Committee, the Board of Directors of the Company reappointed Dr. Shalini Sarin (DIN 06604529) as "Non-Executive Independent Director" with effect from 25th October 2024. The Company has received requisite notice in writing from a member proposing her candidature for office of Director.

The resolution seeking approval of the Members by special resolution for the re-appointment of Dr. Shalini Sarin for a second term of 5 consecutive years, has been incorporated in the notice of the forthcoming Annual General Meeting of the Company.

v. The first term of appointment of Mr. Sunil Shah Singh (DIN 00233918), as Independent Director of the Company, was valid till 11th September 2023. Consequent to this, he ceased to be a Director of the Company with effect from 12th September 2023.

vi. Mr. Mahesh R. Chhabria (DIN 00166049) retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment.

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

None of the Directors of the Company have resigned during the year under review.

i. Mr. Anurag Bhagania, tendered his resignation vide letter dated 22nd September 2023 as Chief Financial Officer and Key Managerial Personnel of the Company due to personal reasons with effect from close of working hours of 22nd November 2023. Further, the Company has received confirmation from Mr. Anurag Bhagania that there was no other material reason for his resignation other than those mentioned in his resignation letter dated 22nd September 2023. The said confirmation was filed with BSE Limited and National Stock Exchange of India Limited on 22nd September 2023.

ii. Mr. Sachin Kejriwal, the Chief Financial Officer of the Company, is appointed as the Key Managerial Personnel of the Company, with effect from 9th May 2024.

Other than the above, there are no other changes in Key Managerial Personnel of the Company in the Financial Year 2023-24.

The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence as prescribed under Section 149(7) of the Companies Act, 2013 & Rules thereof including amendments thereunder and Regulation 16(1)(b) & 25(8) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 including amendments thereunder.

The Company has also received declarations from all the Independent Directors of the Company confirming that they have complied with the Code for Independent Directors as prescribed in Schedule IV to the Companies Act 2013 including amendments thereunder. The said Code is available on the Company's website.

All the Independent Directors of the Company have enrolled themselves in the data bank with the ‘Indian Institute of Corporate Affairs', New Delhi, India and eligible Independent Directors have also completed the proficiency test.

There has been no change in the circumstances affecting their status as Independent Directors of the Company.

The Board of Directors of the Company have taken on record the declaration and confirmation submitted by the Independent Directors after undertaking due assessment of the veracity of the same.

The Board of Directors considered that Mr. Arvind Goel (DIN 02300813) possess the requisite expertise and experience (including the proficiency) and he is the person of high integrity and repute and accordingly recommended his appointment as Independent Director which was approved by the Members in the Annual General Meeting held on 11th August 2023.

Other than the above, there are no other appointment of Independent Directors of the Company in Financial Year 2023-24.

The Board of Directors carried out a formal review of the performance and effectiveness of the Board, Committees of the Board and of the individual directors including the Chairman of the Board for the Financial Year 2023-24.

The performance of the Board was evaluated on the basis of criteria such as the board composition and structure, effectiveness of Board processes, participation in organization strategy including Long Range Plan and Annual Operating Plan, inorganic growth opportunity evaluation, Enterprise Risk Management etc.

Using appropriate criteria the performance of the various Committees was separately evaluated by the Board.

In a separate meeting of Independent Directors, performance of non-independent directors, performance of the Board as a whole, performance of the Chairman, taking into account the views of executive directors and non-executive directors, was evaluated and inter alia discussed the issues arising out of Committee Meetings and Board discussion including the quality, quantity and timely flow of information between the Company Management and the Board that is necessary for the Board to effectively and reasonably perform their duties. The outcome of the meeting was presented to the Board along with the course of actions taken for implementing the observations.

A separate exercise was carried out to evaluate the performance of individual Directors including the Chairman of the Board, who were evaluated on parameters such as achievement against key performance objectives, attendance at meetings, time devoted for the Company, contribution in the Board process etc.

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

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

The Directors expressed their satisfaction with the evaluation process. The result of evaluation was satisfactory and meets the requirements of the Company.

The Board of Directors, on the recommendation of the Nomination & Remuneration Committee, has adopted a policy that lays guidelines for selection and appointment of Directors, Key Managerial Personnel and Senior Management personnel together with their remuneration.

The Nomination and Remuneration Policy is available on the website of the Company. (Web – link https://www. kirloskaroilengines.com/documents/541738/2bd3cfb1-7d20-f25a-1163-3a003fd96c15)

During the period under review, Six (6) Board Meetings were held, the details of which form part of the Report on Corporate Governance.

The Composition including terms of references of Committees of the Board viz. Audit Committee, Nomination and Remuneration Committee, Risk Management Committee and Stakeholders Relationship Committee forms part of the Report on Corporate Governance.

The Composition of Corporate Social Responsibility Committee forms part of Annexure A of this report.

During the year under review, the Board has accepted all the recommendations given by the Committees of the Board, which are mandatorily required.

During the year under review, the Company has invested in a) Equity shares of Arka Financial Holdings Private Limited, Wholly Owned Subsidiary of the Company and b) Series A-1 Optionally Convertible Redeemable Non-Cumulative Preference Shares of Kirloskar Americas Corporation, USA. The details are given in the Financial Statements. The Company has not granted any Loans and Guarantees covered under Section 186 of the Companies Act, 2013 & Rules thereof including amendments thereunder.

During the year under review, the Company altered the Main Object Clause of Memorandum of Association, with the approval of members of the Company in the Annual General Meeting held on 11th August 2023, to consider the new business in order to enhance ability to deliver to the long-term strategy of the Company.

All related party transactions that were entered into during the Financial Year 2023-24 were on an arm's length basis and in the ordinary course of business. Hence, there are no transactions to be reported in Form AOC-2. None of the related party transactions entered into by the Company, were materially significant, warranting members' approval under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 including amendments thereunder. All Related Party Transactions are routinely placed before the Audit Committee for approval after being duly certified by the Independent Chartered Accountant. The Audit Committee had granted the omnibus approval for the proposed transactions other than those approved by the Audit Committee from time to time with Related Party during Financial Year 2023-24, which are reviewed on quarterly basis by the Audit Committee after being duly certified by the Independent Chartered Accountant.

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

The disclosures as per Ind AS 24 for transactions with related parties are provided in the Financial Statements of the Company. Refer Note No. 40.5.11 of standalone financial statements

The Board recognizes the importance of sound internal controls and risk management practices to good corporate governance. The Board is responsible for the governance of risk and ensures that management maintains a sound system of risk management and internal controls, to safeguard the interests of the Company and its shareholders. All material decisions of the Board take into relevant consideration the nature and extent of risks which the Company is willing to take in achieving its strategic objectives and value creation. The Company's internal control system is commensurate with the nature of the business, size and complexity of operations covering all businesses and functions of the organization. The internal control system maintains a repository of internal controls which is tested and updated through its internal audits to ensure that adequacy and effectiveness of all major internal controls. In line with the commitment of a high standard of compliance with accounting, financial reporting, internal controls, corporate governance and auditing requirements and any legislation relating thereto, the Company has a Code of Business Conduct applicable to Company personnel covering a wide range of business practices and procedures. This includes, but is not limited to, compliance with laws, rules and regulations, conflicts of interests, insider trading, competition and fair dealing, discrimination and harassment, health and safety, environmental matters, record-keeping, financial controls and disclosures, confidentiality, protection and proper use of company assets, financial reporting and compliance. The Company's risk management process is designed to facilitate identification, evaluation, mitigation and review of risks which may affect achievement of objectives. It is aligned with the strategy deployment processes of the organization. A risk based audit plan on a yearly basis is approved by the Audit Committee. The audit plan covers all businesses and functions across all locations. Significant observations and progress of implementation of action plan are reported to and reviewed by the Audit Committee.

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

The Risk management process which has been established across the Company, addresses major types of risks, including cyber security, which are at enterprise and business level. The risks are reviewed with respect to the likelihood and impact following a balanced bottom-up and top-down approach covering all businesses and functions of the Company. The review of the risks is done based on changes in the external environment, which have a significant bearing on the risks. The Risk Management Policy developed by the Company guides the risk management processes which is in line with size, scale and nature of the Company's operations. The risk management process works at various levels across the organization. It is an ongoing process and forms an integral part of Management focus.

The Risk Management Committee oversees risk management standards, practices, and systems. The Risk Management Committee periodically reviews the effectiveness of the Enterprise Risk Management system within the Company and evaluates the adequacy and effectiveness of administrative, operating, and accounting controls used by the Company.

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

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

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

The Company has in place adequate internal financial controls with reference to the Financial Statements commensurate with the size, scale and complexity of its operations.

The Company has in place a comprehensive and robust legal compliance management online tool, which is devised to ensure compliance with all applicable laws. Automated alerts are sent to compliance owners to ensure compliances within stipulated timelines. The compliance owners certify the compliance status which is reviewed by compliance approvers and a consolidated dashboard is presented to the respective functional heads and Compliance Officer. A certificate of compliance of all applicable laws and regulations is placed before the Board of Directors on a quarterly basis.

The Company has always believed in working for the betterment and uplift of society. Corporate Social Responsibility (CSR) has been practiced and ingrained over the years in the Company. The focus areas under CSR have remained consistent over the years and include education, health and hygiene, environment, Disaster Management and Rural development etc.

The Company has adopted the Corporate Social Responsibility (CSR) policy which is further amended in lines with the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021.

The Composition of CSR Committee of the Board and Report on CSR activities is annexed herewith in Annexure A.

106

The Company has adopted a Vigil Mechanism / Whistle Blower Policy. The Policy provides a mechanism for all directors, employees of the Company and persons dealing with the Company to report to the Chairman of the Audit Committee or Ethics Committee or Ethics Ombudsman any instance of unethical behaviour, actual or suspected fraud or violation of the Company's code of conduct or leakage of Unpublished Price Sensitive Information (UPSI), by any person, who is in possession of UPSI, to any other person in any manner whatsoever, except as otherwise permitted under the SEBI (Prohibition of Insider Trading) Regulations or any other instance. The e-learning and awareness on whistleblower policy is made available to the employees of the Company.

The Company adopted online Ethics Helpline to report any suspected violations of code of conduct or any other ethical concerns or raise concern under Whistle Blower / Vigil Mechanism, through email / hotline / webmode. The Company had a tie-up with an independent third party specialist service provider "Integrity Matters" to handle concerns reported. Accordingly, the Vigil Mechanism / Whistle Blower Policy was amended which is uploaded on the Company's website (weblink: https://www.kirloskaroilengines.com/ documents/541738/4807df9b-9b90-fde0-0d89-61d9fd9de35e )

No person has been denied access to the Audit Committee in this regard. There were no complaints filed / pending with the Company during the year.

As required under Section 92(3) read with section 134(3) (a) of the Companies Act 2013 read with rule 12 of the Companies (Management and Administration) Rules, 2014 including amendments thereunder, the Annual Return filed with the Ministry of Corporate Affairs (MCA) for the Financial Year 2022-23 is available on the web-link (https://www. kirloskaroilengines.com/documents/541738/50a11099-1263-3802-f6a1-8899e1c5631d) and the Annual Return for Financial Year 2023-24 will be made available on the website of the Company once it is filed with the MCA.

Information relating to conservation of energy, technology absorption and foreign exchange earnings and outgo as required under section 134(3)(m) of the Companies Act, 2013,& Rules thereof including amendments thereunder , are provided in Annexure B to this report.

TheBoardcontinuestohaveasharpfocusonEnvironmental,Social and Governance (ESG) agenda to ensure long-term value creation for all stakeholders through sustainable business practices.

The ESG Committee of the Company provides strategic guidance on ESG strategy. The review and progress made on ESG are reported to the Risk Management Committee, Audit Committee and Board of Directors periodically. For more details refer ESG section on page no. 37.

The key initiatives taken by the Company with respect to stakeholder relationship, customer relationship, environment, sustainability, health and safety are provided separately under various Capitals and Business Responsibility and Sustainability Report, as a part of this Report.

Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 including amendments thereunder, are annexed in Annexure C of this report.

The particulars of employees pursuant to Section 197(12) of the Companies Act, 2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 including amendments thereunder, forms part of this report. In terms of Section 136 (1) of the Companies Act, 2013 & Rules thereof including amendments thereunder, the Directors' report is being sent to the shareholders without this Annexure. A copy of this annexure will be made available in electronic form to the members on request raised by them on the dedicated email id of the Company at investors@kirloskar.com.

The Company has in place a Policy for prevention of sexual harassment at workplace. This inter alia provides a mechanism for the resolution, settlement or prosecution of acts or instances of Sexual Harassment at work and ensures that all employees are treated with respect and dignity. The Company has complied with the provisions relating to the constitution of internal complaints committee under the Sexual Harassment of Women at work place (Prevention, Prohibition and Redressal) Act, 2013.

Awareness programs are conducted on the POSH during the Financial Year 2023-24. Also, all new joinees at the Company undergo separate induction on POSH policy. Online modules and courses on POSH were carried out which included details of regulatory requirements, Incidents that constitutes sexual harassment, dealing with sexual harassment etc.

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

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

b. There was no instance of fraud during the year under review, which required the Statutory Auditors to report to the Audit Committee and / or Board under Section 143(12) of Act & Rules thereof including amendments thereunder.

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

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

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

f. There have been no material changes and commitments, affecting the financial position of the Company which have occurred between the end of the Financial Year of the Company to which the Financial Statements relate and the date of this Report.

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

h. Ms. Gauri Kirloskar (DIN: 03366274), Whole – Time Director designated as Managing Director of the Company, had received the commission of H 5,00,000/- during Financial Year 2023-24 from Arka Fincap Limited, Step down Subsidiary Company.

i. Details of unclaimed dividends and equity shares transferred to the Investor Education and Protection Fund authority have been provided as part of the Notice of the Annual General Meeting.

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

The Company has received from them the requisite certificate pursuant to Section 139 of the Companies Act, 2013 & Rules thereof including amendments thereunder.

The Report given by the Auditors on the Standalone and Consolidated financial statements of the Company for the Financial Year 2023-24 is part of this report. There are no qualifications, reservations, adverse remarks or disclaimer given by the Auditors in their report.

M/s. Parkhi Limaye & Co, Cost Accountants (Firm Registration No. 191) carried out the cost audit during the year. The Board of Directors has appointed M/s. Parkhi Limaye & Co. as Cost Auditors of the Company for the Financial Year 2023-24 as required under section 148 of the Companies Act, 2013 & Rules thereof including amendments thereunder.

The Board of Directors has appointed Mr. Mahesh J. Risbud, Practicing Company Secretary [PCS No. 185] to conduct Secretarial Audit of the Company under section 204 of the Companies Act, 2013 & Rules thereof including amendments thereunder.

The Secretarial Audit Report is annexed herewith in Annexure D-1.

In the Secretarial Audit Report for the Financial Year 2023-24 the following is stated:

The Company is not in compliance with the provisions of Regulation 26A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 including amendments thereunder in respect of filling up of vacancy of Chief Financial Officer.

There are no adverse remarks / qualifications of Secretarial Auditors in the Secretarial Audit Report for the year ended 31st March 2024.

Mr.MaheshJ.Risbud,PractisingCompanySecretary,Pune, has submitted Secretarial Compliance Report as laid down in SEBI Circular SEBI/HO/CFD/PoD2/CIR/P/2023/120 dated 11th July 2023 and SEBI Circular CIR/CFD/ CMD1/27/2019 dated 8th February 2019 read with circular no. NSE/CML/ 2023/21 dated 16th March 2023 and circular no. NSE/CML/ 2023/30 dated 10th April 2023 issued by National Stock Exchange of India Limited and notice no. 20230316-14 dated 16th March 2023 and notice no. 20230410-41 dated 10th April 2023 issued by BSE Limited ("Circulars"), and has also confirmed that the Company has complied with of all applicable SEBI Regulations and circulars / guidelines issued thereunder, for the Financial Year 2023-24.

La-Gajjar Machineries Private Limited (LGM), and Arka Financial Holdings Private Limited (AFHPL) are material unlisted subsidiaries of the Company. The Secretarial Audit of LGM and AFHPL for the Financial Year 2023-24 were carried out pursuant to Section 204 of the Companies Act, 2013 & Rules thereof including amendments thereunder read with Regulation 24A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 including amendments thereunder. The Secretarial Audit Report of LGM has been submitted by Mr. Mahesh J. Risbud, Practicing Company Secretary, Pune, (FCS No.: 810 C. P. No.: 185) for the Financial Year 2023-24. The Secretarial Audit Report of AFHPL has been submitted by Mayekar and Associates, Practicing Company Secretaries, Mumbai, FCS – 2071, COP – 2427, for the Financial Year 2023-24.

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

There are no adverse remarks / qualifications in the Secretarial Audit Reports of LGM and AFHPL for the Financial Year 2023-24.

The Management Discussion and Analysis and the Report on Corporate Governance as required under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, including amendments thereunder, forms part of this Annual report.

A Certificate from the Statutory Auditors of the Company regarding compliance with conditions of corporate governance as required under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, including amendments thereunder, also forms part of this Annual Report.

Pursuant to Regulation 34 of SEBI (Listing Obligations and Disclosures Requirements) Regulations, 2015, including amendment thereunder, the Business Responsibility and Sustainability Report (BRSR) for Financial Year 2023-24 is forming part of this Annual Report.

Pursuant to Section 134 of the Companies Act, 2013, including rules made thereof and amendments thereunder, the Directors, based on the representations received from the Operating Management, confirm that:

a) In the preparation of the Annual Accounts, the applicable accounting standards have been followed and that no material departures have been made from the same;

b) They have selected such accounting policies, and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March 2024 and of the profit of the Company for the year ended on that date;

c) They have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding assets of the Company and for preventing and detecting fraud and other irregularities;

d) They have prepared the annual accounts on a going concern basis;

e) They have laid down internal financial controls to be followed by the Company and such internal financial controls are adequate and operating effectively; and

f) They have devised proper systems to ensure compliance with provisions of all applicable laws and such systems are adequate and operating effectively.

The aforesaid statement has also been reviewed and confirmed by the Audit Committee of the Board of Directors of the Company.

Statements in this report, particularly those which relate to ManagementDiscussion&Analysis,describingtheCompanys objectives, projections, estimates and expectations may constitute "forward looking statements" within the meaning of applicable laws and regulations. Actual results may differ materially from those either expressed or implied.

On behalf of the Directors, I would like to extend our sincere gratitude to our shareholders, investor community, bankers and suppliers for their continuous support and commitment.

I would like to express my appreciation to the Board of Directors for their invaluable guidance, wisdom, and support in guiding the Company through this rather difficult year. I look forward to working with them to drive KOEL to greater heights in coming years.