IBH REPORT

A

report

On

Indian Business House

KIRLOSKAR GROUP OF COMPANIES Prepared

Under the guidance of

Mr. Jai Singh

Director

IIeBM

Pune

INDIAN INSTITUTE OF e-BUSINESS MANAGEMENT,

WAKAD,PUNE

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INDIAN BUISNESS HOUSE- KIRLOSKAR GROUP

They are a 1.20 billion US Dollars engineering conglomerate driving critical industries. They are century old pioneers in our areas of specialization like power, construction and mining, agriculture, industry and transport, oil and gas and environment protection with a range of world-class industrial products and turnkey services.

They are made up of 8 major group companies, each led by the best engineering and managerial talent in India. In addition to engineering, they have interests in civic utility systems and in Information Technology and communication.

Their multi-unit, multi-product, multi-location conglomerate is built on the plinths of Experience, Expertise, Quality, Innovation and Values in the business. Their best play is successful work and creation of a new industrial order where they can provide tailor made solutions to the customers.

At Kirloskar, listening to the customer and his needs is a tradition as old as the group itself. For it is they who drive us further, make us reach higher, and engineer better solutions. In the customer's often unspoken wish for better implements lies the seed for a new invention, a path-breaking industrial concept.

THEY ARE KIRLOSKAR GROUP OF COMPANIES

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1. ORIGIN AND FOUNDER

1.1 THE FOUNDER AND THE FIRST FACTORY VILLAGE

The Kirloskar story starts with Laxmanrao Kirloskar, the

founder. A man who believed that an understanding of one's

environment and reality was essential to the manufacture of

path-breaking industrial implements. From this steadfast belief

was born the iron plough, the first Kirloskar product. Originally

intended as an essential aid to agriculture, the plough soon

became an icon of reform and revolution.

A highlight of the early history of the group is Kirloskarvadi,

India's first industrial township. A model factory-village created

by Laxmanrao and his band of dedicated workers.

In January 1910, when the Kirloskar were being ousted from Belgaum to make room

for a new suburb, they found themselves in dire need of a place to live and work.

Sensing this need, the Raja of the princely state of Aundh, who admired and respected

Laxmanrao Kirloskar, offered the latter all the land he needed in Aundh state.

Two months later, Laxmanrao Kirloskar set foot on 32 acres of barren land strewn with

cacti and infested with cobras. Driven by his faith in human ability, Laxmanrao bonded

together 25 workers and their families and succeeded in transforming the barren

expanse into his dream village.

Ramuanna, Laxmanrao's brother, planned and administered the township, Shamburao

Jambhekar doubled as engineer and all-round healing man, K.K.Kulkarni, an

unsuccessful student, became a manager, treasurer and odd jobs man, Mangeshrao Rege

was the clerk and chief accountant, Anantrao Phalnikar, a school drop-out flowered into

an imaginative engineer. Such was our founder's faith in the human being that,

Tukaram Ramoshi and Pirya Mang, both convicted dacoits, became the trusted guards

of Kirloskarvadi

Laxmanrao

Kirloskar

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2. HISTORY, VISION ,MISSION

2.1. THE HISTORY OF KIRLOSKAR

It has now been more than a century since the Kirloskar story started. They started with

an aim of becoming the pioneers in fields in which country needed innovation. In the

100 years and more that they have been in existence as a family and as an organization,

they have been seminal to Indian agricultural and industrial development. They gave

India its first iron plough, pump and engine, inventions that were devised from the need

of the hour and went on to become signs of the time Which is why group history can in

many ways can be considered a history of the economic and industrial revolution in

India.

2.2. VISION

Business for us is the best service, customer care and a lifelong relationship.

Where are they headed?

We believe in synergy and its limitless power of unifying. It is not limited to our group.

It extends to the realms of customer/collaborator relations, investor interactions and into

market trends analyses and technological advances. It is the only way we ensure that

when an endeavor is made by several different elements, the result is of a far higher

quality than what could have been achieved by each element acting alone. Our policies

and practices help in treating the customer as the most important part of our family. We

do work for profit but our profits are guided by the motives which suit best the

customer needs.

How do they plan to reach there?

For the Kirloskar Group, engineering excellence is not an end, but a journey. An array

of business solutions stand testimony to the fact, that good business values, pillared by

expertise can work wonders. Solutions, which are crafted from a solid base of

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developing and manufacturing, generate reliable products and superior service. Through

which, continual measurement of customer satisfaction is offered. It's a commitment

rather than a ritual.

From our early agricultural implements to our hi-tech engineering products, we've been

always weaving our corporate goals into our clients' expectations by providing

expertise and delivering technology that they can benefit from and rely on us at globally

competitive prices.

Today, we are in the process of concentrating our collective energies on core industry

sectors to give us a sustainable competitive edge in terms of both quality and price.

The Kirloskar Group's customer base currently ranges from heavy industries like power

generation, steel and chemicals to the mechanic in his workshop and the farmer in the

fields. Across this wide spectrum of clients, many of whom are overseas, the one thing

that remains consistent is that they all matter to us and call us for more of our service,

products and better solutions.

2.3 MISSION

1. To provide quality services while following sound business practices.

2. To enhance the standards of ethical conduct, which are based on core Kirloskar

group values.

3. To evolve as good corporate citizens by implementing highest Degree of

transparency, integrity, accountability and corporate Social responsibility.

4. To further achieve good corporate governance by complying with all laws, rules, and

regulations applicable to the Company and fulfilling responsibilities towards

stakeholders.

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5. To comply with all applicable laws, rules, regulations and Regulatory orders.

6. To acquire appropriate up to date knowledge of requirements of Compliances under

various applicable statues.

7. To ensure that proper legal compliance management system is in place for reviewing

and reporting the status of compliances under various laws.

8. To act in utmost good faith and in accordance with highest Standards of personal and

professional integrity, honesty and ethical conduct in respect of all transactions.

9. To avoid scrupulously ‘conflicts of interest’ with the Company.

10. Not to exploit for their own personal gain, opportunities that are discovered through

the use of the Company’s property (including intellectual property), information or

position.

11. Not to divert to his/her own advantage any business Opportunity that the Company

is pursuing.

12. To deal fairly with the stakeholders and employees of the Company.

13. To maintain the confidentiality of sensitive information of the Company or that of

any stakeholder to which the Company has a duty of confidentiality to maintain, except

when disclosure unauthorized or legally mandated. The confidential information

includes all information not in the public domain that might be of use to competitors or

harmful to the Company or companies in the Kirloskar group, if disclosed.

14. Not to use of confidential information for own advantage or profit.

15. To protect Company’s assets and properties, including

Intellectual property and ensure its efficient use.

16. To ensure the use of Company’s property for legitimate Business purposes.

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17. To ensure to have a proper system of safeguarding the interest of all stakeholders.

18. To disclose necessary information to the Company, at regular intervals in respect of

various declarations under the various acts, rules and regulations, including the

companies Act, 1956, and the details of related parties from time to time.

19. To promote ethical and responsible decision making.

20. To contribute in the most effective manner to achieve the vision and mission of the

Company.

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3. CORE BUISNESSES AND COMPANIES

They are made up of 8 major group companies, who are players in major sectors like (1) MANUFACTURING (2) OIL AND GAS (3) POWER (4) CONSTRUCTION AND MINING (5) AGRICULTURE (6) INDUSTRY AND TRANSPORT Each led by the best engineering and managerial talent in India. In addition to engineering, they also have interests in civic utility systems and in Information Technology and communication. These 8 companies form the core of Kirloskar group. Each company is a renowned name in its own area of operation and is respected world wide for its services and products. For them manufacturing is just not limited to their factory premises and their products. It is also about world class service.

· Kirloskar Brothers Limited. (KBL) · Kirloskar Ferrous Industries Limited. (KFIL) · Kirloskar Middle East FZE. (KMEF) · Kirloskar Oil Engines Limited. (KOEL) · Kirloskar Pneumatic Company Limited. (KPCL) · Kirloskar Proprietary Limited. (KPL)

They are also proud partners in joint ventures with companies like Ebara Corporation, Toyota Motor Corporation, the renowned auto manufacturer.

· Kirloskar Ebara Pumps Limited. (KEPL)

They take equal pride in shaping capable managers and dedicated human beings at Kirloskar Institute of Advanced Management Studies. It is their education center for imparting knowledge to the managers of tomorrow.

· Kirloskar Institute of Advanced Management Studies (KIAMS)

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http://kirloskarapps.kirloskar.com/kirloskar/aboutkirloskar/kbl.html

http://kirloskarapps.kirloskar.com/kirloskar/aboutkirloskar/kfil.html

http://kirloskarapps.kirloskar.com/kirloskar/aboutkirloskar/kfil.html

http://kirloskarapps.kirloskar.com/kirloskar/aboutkirloskar/kmef.html

http://kirloskarapps.kirloskar.com/kirloskar/aboutkirloskar/koel.html

http://kirloskarapps.kirloskar.com/kirloskar/aboutkirloskar/koel.html

http://kirloskarapps.kirloskar.com/kirloskar/aboutkirloskar/kpcl.html

http://kirloskarapps.kirloskar.com/kirloskar/aboutkirloskar/kpl.html

http://kirloskarapps.kirloskar.com/kirloskar/aboutkirloskar/kpl.html

http://kirloskarapps.kirloskar.com/kirloskar/aboutkirloskar/kepl.html

http://kirloskarapps.kirloskar.com/kirloskar/aboutkirloskar/kiams.html


4.BUSINESS PHILOSOPHY BUSINESS POLICIES

4.1. BUSINESS PHILOSOPHY

4.1.1 STRATEGIC DIRECTION OF KIRLOSKAR

Attain cost leadership through effective development of measures such as

Ø Rationalization of supplier base and getting them committed.

Ø Increased inventory turns.

Ø Rev up operational efficiencies.

Ø Enhance man-machine utilization (flexible set ups, multi-skiling QC, kaizens).

Ø Instill respect for money across stake-holder

4.1.2 THEIR THRUST AREAS.

Ø Reduce number of suppliers.

Ø Reduce material inventory.

Ø Reduce working capital.

Ø Reduce shop rejection.

Ø Reduce tool cost.

Ø Reduce machine maintenance cost.

Ø Improve productivity- man, machine, and money.

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4.2. BUSINESS POLICIES

It’s happening at Kirloskar. We’ll continue to make it happen

The Kirloskar Way CUSTOMER ORIENTATION

The customer is our strategic partner in growth and an endless source of inspiration. We

will encompass change and intensify our operations to face the challenge of the

World Trade Order in the Global market. Unite each person, process, department and

company within the group in cross functional teams to create engineering solutions for

our customers.

Through our Distribution network, focus at delivering goods and services efficiently at

minimal cost while keeping low inventory and receivables

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QUALITY

Quality can always get better. We can achieve zero rejections by constantly upgrading

the technology and resources.

COST CONTROL

There is no product or process for which cost cannot be reduced further.

We must emphasize Process Orientation where only the processes leading to the final

deliverables at economical cost matter.

There is no limit to a person’s work density if you standardized work and change to

process oriented working

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CASH MANAGEMENT

With efficient working capital management, net working capital can be zero, or

negative. Achieve 100 inventory turns per year.

ENVIRONMENT MANAGEMENT

Design and produce environmentally friendly products in environmentally friendly

factories.

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5. PROGRESS OVER THE YEARS

Ø 1888--- The Beginning.

Ø 1903--- Indian’s First Iron Plough.

Ø 1920--- Incorporation.

Ø 1920--- Kirloskar Brothers Ltd.

Ø 1927--- India’s First Centrifugal Pump.

Ø 1937--- India’s First Diesel Engine.

Ø 1940--- India’s First Electric Motors and India’s First Lathe.

Ø 1941--- Mysore Kirloskar Ltd.

Ø 1946--- Kirloskar Oil Engines Ltd.

Ø 1946--- Kirloskar Electric Ltd.

Ø 1954--- India’s First Reciprocating Compressor.

Ø 1958--- Kirloskar Pneumatic Ltd.

Ø 1958--- Technical Agreement for Large Pumps.

Ø 1960--- Technical Agreement for Vertical Turret Lathes.

Ø 1968--- Manufacture of Hermetic Compressors.

Ø 1973--- Large scale Exports to Europe.

Ø 1983--- Joint Design of Pumps with French Company.

Ø 1988--- Centenary Year Portable Fire- fighting Pumps.

Ø 1988--- India’s first Canned Motor Pumps.

Ø 1988--- Joint Venture for Process Pumps.

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Ø 1988--- Kirloskar Ebara Pumps.

Ø 1991--- Collaboration for Sub- mersible Pumps.

Ø 1993--- Joint Venture for Hermetic Compressors.

Ø 1993--- Kirloskar Copeland.

Ø 1995--- India’s First Concrete Volute Pumps.

Ø 1998--- Technical Agreement for Small Hydel Turbines.

Ø 2001--- Introduction of Pressed Stainless Steel Pumps.

Ø 2001--- World’s Largest Pumping Project EPC Contract won- SARDAR

SAROVAR.

Ø 2003--- Acquisition of SPP, UK.

Ø 2006--- JV with Corrocoat, UK.

Ø 2006--- Divestment of Kirloskar Copeland.

Ø 2006--- Acquisition of ABAN Construction.

Ø 2007--- Kirloskar Brother takes over management of ailing Kolhapur Steel.

Ø 2007--- Andhra Pradesh Govt. order for Kirloskar Brother.

Ø 2007--- Kirloskar Brother to issue 2:1 bonus share.

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2.1. ORGANIZATIONAL STRUCTURE

KOEL

PUNE, AHMEDNAGAR, NASIK, PHURSUNGI

BUISNESS

SERVICES

(a) AUTO COMPONENTS Pune, Ahmednagar, Nasik

(A) SECUTARIAL AND LEGAL

Pune

(B) LARGE ENGINES & SPARES

Nasik

(b) MANAGEMENT SERVICES

Pune- HR, Personnel, IT corporate

(C)SMALL ENGINES & SPARES

Phursungi

17 offices and 14 depots

(c) CORPORATE FINANCE Pune

(D)MEDIUM ENGINES & SPARES

Pune and Phursungi

9 offices and depots

(d) OTHER OPERATIONS Pune

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2.2 REVISED VISION,MISSION AND OUTLOOK 2.2.1 REVISED VISION

2.2.1.1 REVISED VISION 2012

COMPANY LEVEL TARGET

In the am today, we agreed to the company level target as - profit of Rs. 950 cr. On sale

of Rs. 8,500 cr. By 2012. To attain the profit of Rs. 950 cr precisely figures are as under.

Sbu Sales Profit P/s

Se 1,300 115 8.8%

Me 3,500 454 13.0%

Le 700 73 10.4%

Acbg 225 23 10.2%

Export 2,800 285 10.2%

Total 8,525 950 11.1%

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These numbers are in the following statements

COMPANY VISION 2012:

They will become globally major player in off – highway engines and power

generation businesses by offering winning combinations of quality, cost and

delivery through innovation and unmatched service. Thus, they will strive to

attain amongst top ten positions worldwide in selected engine businesses. While

pursuing the above, they will continue to enhance the value of engine bearing and

valves business.

2.2.2 COMPANY MISSION 2012

· Profit of Rs. 950 cr. On sales of Rs. 8,525 cr.

· Achieve cii exim business excellence score of 600+ points by assessment year

2012

· Sebg vision 2012

To achieve 50% of sales from newly developed compact and reliable engines,

pump sets and generating sets which will be introduced from 2007.Superior

manufacturing and efficient distribution will differentiate them in traditional

products.

Sebg mission 2012

· Profit of rs. 115 cr. On sales of rs. 1,300 cr. From domestic markets


2010

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Mebg vision 2012

To be a business generating by design, manufacture and sales of off-highway

engines and generating sets. We will offer alternate liquid and gas fuel choices.

By 2012, 40% of their yearly sales will be through export sbu by offering winning

combination of quality, cost and delivery in their products and services through

innovation and unmatched service by creating a process centric organization, and,

will move up the value chain by offering comprehensive solutions over product

life.

Mebg mission 2012

· Profit of rs. 454 cr. On sales of rs. 3,500 cr. From domestic markets


2010

Lebg vision 2012.

To manufacture, sell and service engines and generating sets above 1.5 mw by strengthening and leveraging our position in India and expand power generation business in the regional countries. By 2012, 35% of our yearly sales will be from gas engines and 10% of our yearly sales will be through export sbu.

Lebg mission 2012

· Profit of rs. 73 cr. On sales of rs. 700 cr. From domestic markets

· Maintain leadership position in India, in propulsion of Defence marine

ships.

· Develop turnkey project capability

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Acbg vision 2012

We will enhance the value of engine bearings and engine valves business by

offering winning combination of quality, cost and delivery through process centric

organization. By 2012, 40% of our yearly sales will be through export sbu.

Acbg mission 2012

· Profit of rs. 23 cr. On sales of rs. 225 cr. From domestic markets

· Be lowest cost producer of bearings offering lowest development time

· Achieve delivered ppm <50

Export vision 2012

We will be globally significant player in generating sets (20-600 kva) and diesel

engines (20-700 hp) for off-highway use. We will achieve 15% of yearly sales

from engines in range 700 to 2000 hp and products using alternate liquid and gas

fuels. These will be introduced from 2009. We will generate 10% of our yearly

sales from engine bearings and valves.

We will offer appropriate technology at attractive value-price relationship, and our

focus will be Europe and china for oem businesses and Asia, Africa and middle

east for distribution business.

Export mission 2012

· Profit of rs. 285 cr. On sales of rs. 2,800 cr.

· Attain position of “best company to deal with”

· Offer customized solutions in shortest development time

· Strengthening distribution to full 3s capability

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2.2.3 OUTLOOK

Given the growth momentum and prevailing buoyancy in both the industry and

services sector, they expect the pace to continue during the next fiscal, albeit with

some moderation. The monitoring tightening over the next two years is expected

to affect corporate bottom lines, with moderation in overall demand. They expect

the overall Gross Domestic Product to grow in the range of 7.9 to 8.4% in 2007-

08.

Assuming the normal monsoon, the Gross Domestic Product growth in agriculture

can be expected to continue in alignment with the long term average growth 3%

per annum. If the buoyancy in the services remain unchanged, about 9.5% growth

seems feasible while industrial growth will be expected to deliver about 8.4%.

Even though the recent dip in global crude oil prices and the downward revision in

the domestic prices of petrol and diesel have limited the pressure on the Wholesale

Price Index Inflation, for the moment, continued effort from organization of the

Petroleum Exporting Countries is likely to keep the pressure up to push it back,

thus not providing a sustained comfort for headline Wholesale Price Index

Inflation. They are expecting the average inflation for the year 2007-08 in the 5-

5.5% range. A significant differential in interest rate with respect to international

markets, together with an unbeat sentiment, may attract significant capital inflows,

thereby adding liquidity to the market. However, this influx could offset the RBI’s

objective of monetary tightening. To ensure retention of export competitiveness,

any significant appreciation in the currency is expected to be monitored carefully

by the RBI.We also expect he rupee to trade at 40-42 against the Dollar by the end

of this fiscal .

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2.3 H.R, MARKETING, FINANCEAND SAFETY

POLICIES

2.3.1 HUMAN RESOURCES AND INDUSTRIAL RELATIONS

KBL emphasizes on the quality of its human

optical, which it considers it’s most important

asset. The Corporate Human Resource

Management and Communication

(CHRM&C) function strives towards

development of competence amongst all strata

of people to fill today’s slots and to address

future organizational and individual needs. It

has assessed the impact of its policies and is

taking measures to retain and to attract talent

on an on going basis.

The CHRM&C department is committed to

support and be a facilitator of change through

implementation of most technique for

productivity improvement, 5’S’ and business

excellence model implementation.

Employee relations at all locations are

harmonious and cordial as always. Collective

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forums comprising Management and Union representatives are extensively used

for amicable redressing of grievances.

2.3.1.1 HUMAN RESOURCE STRENGTHS

Total Employees :-2551

Engineers :-636

Vendors Over : - 500

Dealer : - 900

Harmonious labour relations since 1942

2.3.2 MARKETING

Market Trend

Ø Preference to a total fluid handling solution provider

Ø Shift in market from EPC / turnkey projects to water management/water

business ( BOOT / BOT projects )

Ø Rising awareness and needs of energy efficient and low life cycle cost

Ø for pumping systems

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KBL Approach

Ø Focus on infrastructure segments - water supply, irrigation & power as total

fluid handling solution provider

Ø Positioning & strategising to address global pump market- Capacities,

World class products and services

Ø Strengthening global distribution network and business

Ø Association with worldwide Consultants & EPC contractors.

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2.3.2.1 MARKET SERVED

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2.3.2.2 MARKET SHARE BY END-USE INDUSTRIES

INSIGI

INSIGHT INTO BUSINESS

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NATIONAL NETWORK

GLOBAL FOOTPRINTS

12 Overseas offices in • Ajman • Atlanta • Cairo • Johannesburg • Miami • Muscat • Nairobi • Paris • Phnom Penh • Reading • Singapore • Vientiane

50 dealers 31 service contact points

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ASSOCIATIONS WITH GLOBAL CONSULTANTS AND EPC CONTRACTORS

ASSOCIATIONS WITH GOVERNMENTS

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2.3.3 FINANCIAL PERFORMANCE

For the first time company’s turnover

and booking have exceeded the Rs 10000

million mark, Net Sales has achieved a

growth of 45% over last year to reach

Rs.13999 million.

Profit before tax is Rs 3750 million as against Rs 1786 million in the previous

year, thereby registering a growth of 113%.Profit Before Tax (without

extraordinary income), stands at Rs 1341 million as against Rs 1037 million in the

previous year, registering a growth of 29%. Borrowings which have gone up from

Rs 252 million to Rs 1470 million and term loans, which went up from Rs 149

million to Rs 449 million and have helped fuel our growth. Depreciation and

amortization has increased to Rs 121 million from Rs 97 million in the previous

year, while interest has increased from Rs55 million to Rs 84 million.

2.3.3.1 FIVE YEARS FINANCIALS 2.3.3.1.1 TURNOVER

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2.3.3.1.2 EBDITA & EBDITA W/O EXTRA-ORDINARY INCOME

2.3.3.1.3 PROFIT BEFORE TAX

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2.3.3.1.4 EARNINGS PER SHARE

2.3.3.1.5 DIVIDEND- PAYOUT / PERCENTAGE

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2.3.3.1.6 BOOK VALUE PER SHARE

2.3.3.1.7 TURNOVER PER EMPLOYEE

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2.3.3.1.8 NET WORTH AND BORROWINGS

2.3.3.1.9 ASSETS

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SAFETY POLICIES

Pune-based Kirloskar Pneumatic offers lifestyle modification workshops, in-house

yoga training facility, Art of Living courses, diabetes management Programmes

and regular check ups for employees as well as their spouses and parents. Health

data analysis has helped in identification of staffers suffering from elementary

stages of life-threatening diseases, thereby prompting them to go for preventive

treatment. The company strives not only to bring in attitudinal and behavioral

changes in employees, but also to offer preventive as well as curative help.

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2.4. CORPORATE GOVERNANCE

2.4.1 CORPORATE GOVERNANCE STATEMENT

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

2.4.2 COMPANIES PHILOSOPHY ON CODE OF GOVERNANCE

The Company’s philosophy of Corporate Governance aims at establishing and

practicing a system of good corporate governance which will assist the

management in managing the company’s business in an efficient and transparent

manner towards fulfilling the corporate objectives and to meet the obligations and

best sub serve the interests of the stakeholders, namely:

· Shareholders: as providers of risk capital, to provide them reasonable

returns and enhance shareholder value.

· Customers: to provide adequate customer service focusing the activities on

customer expectations and meeting them.

· Environment: to adhere to the environment standards to make the product

and process environment friendly and gradually move towards the three

“R’s”-reduce, reuse and recycle.

· Employees: to promote development and well being.

· Society: to maintain Company’s economic viability as producer of goods

and services.

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· Other stakeholders: fulfilling the obligations towards other stakeholders

namely government, suppliers creditors etc.

2.4 APPROACH TOWARDS THE ENVIRONMENT

Environment

Environmental Protection at KBL

Environmental Protection at KOEL

Their culture of conscientious engineering encompasses pollution control, waste management, effluent treatment and eco-friendly engineering. Being a manufacturing group it becomes inevitable for them to take care of the environment. They take full care to meet the environment friendly norms. They have the environment policy to initiate and monitor pollution control practices and to improve

continuously the environment. All of their products are tested to be environment friendly. Moreover, they are manufactured under stringent norms of the least possible emission and waste to meet the standards.

Their contribution to the environment

- ISO-14001 Environment Management System - Implemented by Kirloskar Brothers Limited and Kirloskar Oil Engines Ltd., the group's frontline companies. To initiate and monitor pollution control practices and to improve continuously the environment.

- The R1040 water-cooled engine, manufactured by Kirloskar Oil Engines Ltd., is totally environment friendly and conforms to the norms for year 2000.

What is the ISO-14001 Environment Management System?

ISO-14001 is a member of the ISO-14000 family of international standards which cover management of the environment. The IS0-14001 Standard provides a structured process to achieve continuous improvements in the organisation's environmental performance. It is based on the dynamic and cyclic process of "plan, implement, check and review".

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http://kirloskarapps.kirloskar.com/kirloskar/aboutkirloskar/kbl_environment.html

http://kirloskarapps.kirloskar.com/kirloskar/aboutkirloskar/koel_environment.html


The Policy

The organisation's environmental policy, as enunciated by the top management must reflect its commitment :

a) To comply with relevant environmental legislation and regulations.

b) To make continual environmental improvement and prevention of pollution. This policy is to be documented, implemented, and communicated to all employees. It must also be available to the public, on request.

The Plan

The organisation establishes procedures that will :

a) Identify environmental aspects of its activities /products /services which it can control and over which it can be expected to have influence, so as to know the factors which have significant impact on the environment (air, water or land).

b) Identify the legal and other environmental regulations which apply to the organisation's activities /products/services.

In keeping with its environmental policy, and taking into account the areas of significant impact, the organisation sets appropriate environmental objectives and targets for itself. These targets should be measurable where practicable.

Technological options, financial and operational requirements too, have their say in the shaping of these objectives. Time-frames are set, and the personnel who will implement the environment policy are identified.

Implementation and operation

The ISO-14001 system is integrated with the overall management system for smooth operation. Roles and responsibilities are defined and communicated across the company.

Specific managers are assigned the tasks of :

a) Ensuring that system requirements are implemented in keeping with the international standard.

b) Reporting to top management for review, with a view to improving the system.

Employees at each function/level must be made aware of each one's particular responsibility as also the significant environmental impact/benefits of their work

38



activities. They must fully realize the importance of conforming to environmental policy and the consequences - possibly hazardous - of non-conformance.

Procedures are laid down to identify/deal with emergency and potential - emergency situations and to prevent or mitigate adverse environmental impact.

Resources (human, technological, and financial) are committed to implement the system. Training needs are identified and provided for.

Checks and correction

The organisation's operations which could have a significant impact on the environment must be monitored and measured on a regular basis. To this end, detailed environmental records are maintained.

Responsibility is assigned

a) To investigate any non-conformance.

b) To take action in case of adverse impact.

Periodic environmental audits are submitted to management. These determine whether the environment management system is conforming

1) To the organisation's environment objectives

2) To environment legislation and

3) To the requirements of the international standard.

Review

Periodic reviews by the management are needed to ensure that the system is performing effectively. In light of the audit results, the management may consider changes in its environment policy and objectives or, if need be, initiate action to tackle any major non-conformance.

The benefits

Implementation of ISO-14001 promises :

Improved operational efficiency with better utilization of materials/resources, reduced costs and wastage and reduced pressure on the environment. Assurance to

39



interested parties and increasing access to world markets encourages partnership between industry and the regulatory authority. It enhances corporate image, improves staff morale and the work environment. Importantly, it also helps in building an environment-conscious nation. The ISO-14001 Standard has been accepted enthusiastically by the Indian industry, with 25 companies receiving the certification as of October 1997 (Bajaj Auto, Godrej, INDAL, NALCO, IOC, etc.). By implementing this Standard, these companies have made substantial gains both in terms of saving on resources and preventing environmental degradation.

Environmental Protection at KBL

They say charity begins at home. KBL proved it when it extensively started participating in activities that helped in the environmental protection. In keeping with the ethos of the Kirloskar Group in the conservation of the environment, KBL's involvement in social plantation work began way

back in 1905. It has done outstanding work in tree plantation and greening in and around its plant at Kirloskarvadi. Once a barren, rocky area where only cactus and acacia trees could grow, Kirloskarvadi is today transformed into a lush green township.

Today, Kirloskarvadi boasts of over 28,000 trees. What is more, the survival rate of these is as high as 99%! The trees include Eucalyptus, Mango, Silver Oak, Cypress, Tamarind, and Jack Fruit amongst others.

KBL has helped this cause at the grass root level by setting up institutions like Tree Growers Co-operation etc. It has encouraged plantations by schools, co-operative societies and Gram Panchayats by supplying them seedlings and necessary guidance. The company has also helped the Sagareshwar Sanctuary and Kranti Smruti Van at Balwadi, in its vicinity.

KBL installed a waste treatment plant in 1975 for the treatment of industrial and domestic effluent water. The treated water is circulated in the premises and used for watering lawns.

Moreover, waste foundry sand has been successfully recycled and used in the preparation of the Golf Course at Kirloskarvadi.

In the manufacturing process carried out in Kirloskar Brothers Limited, Kirloskarvadi, there is a possibility of the environment being disturbed due to the following activities.

· The domestic effluents flowing from the colony. · The Industrial effluents flowing from the manufacturing process like coolant oil, cynide salt liquid, waste-water emerging from the painting booth. · Pollution of air due to melting of metal flying dust in foundries and the corrocoat application unit, heating off material in the heat treatment process.

40



To meet the environment threats the company takes following measures: 1. Installation of the industrial and domestic effluent treatment plant (Activated sludge process). (a) Tank capacity: - 750 cubic meters / day. 2. Installation of the Industrial effluent treatment plant (Cynide Slats) (a) Tank capacity: - 9000 liters (b) Methods of treatment: - Alkaline chlorination method for cynide destruction.

3. Hazardous waste management: - After neutralizing solid salts by alkaline chlorination method, the salts are dried and dumped in our scrap yard, in the under-ground pits, 6/8 feet deep and covered with mud.

Features of air pollution control equipments

1. Closed circuit moulding sand preparation and reconditioning plant installed in the Heavy / ACS Foundry. 2. Dust Collection plant for C.I. Foundry sand plant. Installed capacity: - 110 H.P. 3. Industrial dust collector units connected to all the three shot blasting chambers. 4. Hot blast, ash trap type cupolas installed in C.I. Foundry to capture particulate matters. 5. Six electrical induction furnaces used in foundries. The company has also fostered a culture of concern for nature amongst its employees and surroundings communities through regular workshops, seminars and films.

In the near future, KBL plans to support reputed worldwide nature conservation bodies in tree plantation drives and other nature conservation activities.

KBL's activities have been recognized by the State Government of Maharashtra, which bestowed the prestigious Vanashree Award in the year 1992 on it.

41



Environmental Protection at KOEL

KOEL is the first diesel engine manufacturing company in India to get the prestigious EMS 14001 certificate. They also have the honors of being ISO/ EMS 14001 certified company from Nov.1999. They regularly comply with all statuary legislations in terms of standards set by state & central pollution control boards & proactively meeting future regulations today. They have taken efforts to meet the norms and have been quite successful in it. A few that they can mention are:

1.A) They have remade a PMC nala flowing from our premises so that proper flow is maintained & all water drains leading to nala, except rainwater is stopped.

B) All effluent streams are connected to ETP plant, where treated water meets stringent norms of recycled water so that water is used for gardening activity. Today, they are zero discharge company.

C) Closed loop system introduced to all water consumption areas so that recycled water is reused again & again. This has reduced our water consumption from 92000 Kiloliters to 10000 Kiloliters per month.

2) By adopting EMS systems, they have achieved substantial reduction in natural recourses such as water, power, oils & wood during last three years.

3) They have constructed a scrap yard where a facility for segregation of all waste materials, measurement of wastes & proper disposal of each category of waste for recycling to authorized recyclers is ensured.

4) They have eliminated hazardous processes such as electroplating; phosphatizing etc. thus, helping them curtail the use of hazardous chemicals.

Their efforts have made them successful in creating awareness regarding the environment in all their employees & are also continuously training them for awareness regarding environmental matters. The result is that a Kirloskar employee is highly aware about environment care and is a regular participant in environment protection exercises.

They will continue to take care of the environment and ensure that our efforts help others in living healthily.

42



2.5.1 POLLUTION

2.5.1.1 AS INDIVIDUALS:

Ø Ensure our vehicles adhere to stringent pollution norms.

Ø Organize can pools amongst friends to maximize individuals per vehicle.

Ø Shift to more efficient and less polluting fuels.

Ø Club tasks and plan our route efficiently.

Ø No revving at the red signal; the counter on the street light tells you when

to restart your vehicle.

Ø Walk / cycle short distances especially in inner city areas.

2.5.2.2 BUILD PRESSURE ON PUBLIC ADMINISTRATION:

Ø To make separate cycling / walking tracks. The way vehicles hurtle down

the roads spewing exhaust, scares even the most enthusiastic pedestrians /

cyclists off the roads.

Ø To ensure every residential locality has service provides, schools, etc. at a

walking distance; commute if you ‘want to’- not because you ‘have to’.

Ø To revamp public transport system. It should become an alternative of

choice rather than a poor substitute to personal transport.

2.5.2.3 OPPORTUNITY OF IT

Ø Entrepreneurs to boost IT in their organizations. This will make commuting

to office, or shopping for standard products, a redundant activity.

Ø It will ease road congestion, pollution and save money. Discover the

opportunity cost of huge funds spent on broadening roads.

43



2.5.3 CONSERVATION OF ENERGY

Major energy conservation measures taken include:

1. Installation of two 160 KVA and one 100KVA synchronized invertors to use

power generated during generating set testing.

2. Installation of seven 800kW Wind Energy converters to feed the generated

power to the grid at Panchpatta, Nashik, Maharashtra.

3. Installation of VFD with motor.

4. Installation of LED lamps in place of CFL lamps in garden.

5. Installation of Occupancy sensors in toilets.

6. Installation of FRP fan blades in place of Aluminium fan blade for industrial air

circulators.

7. Replacement of 5 HP pumps by 1 HP pump on component washing machine.

8. Installation of auto monitoring system for compressors.

The measurable energy saved from these projects is about 1.2 Million kWh &

wind energy fed to Maharashtra State

Electricity Distribution Company Limited grid is 1.0 million kWh.

Following energy conservation projects are planned:

1. Waste heat recovery of Aluminium melting furnaces.

2. Use of synchronized invertors with alternator to feed generated power during

endurance testing of engines.

3. Waste heat recovery from Compressors.

4. Solar steam generation system.

44



2.5.4 ECOLOGY

2.5.4.1 TERRESTRIAL ECOLOGY

Most of the area is agricultural land, impacted by number of anthropogenic

activities. There are few patches of scrub / forestland which have been conserved

as reserve forest. However, most of these patches lack natural vegetation. It is

dominated by prosopis. The scrubland shows presence of sacarum sp. And

members of Acacia and Zizipus.

2.5.4.1 AQUATIC ECOLOGY

Aquatic communities of all the location shows that major life forms are autotrophs

i.e. phytoplankton. Zooplanktons are very few in numbers. The aquatic ecosystem

is populated by Euglena and Eunotia acus type of phytoplankton the density of

zooplankton is very low. However Epiphranes sp. is the dominating one.

2.6. CORPORATE SOCIAL RESPONSIBILITY

In the year 2007, Company has contributed to various social causes to the extent

of approximately Rs. 6.2 million.

Company continues the following initiatives:

Ø Free Health and Yoga awareness campaigns and free health check-ups

organized for the nearby communities

Ø Free Spectacle Distribution done for the nearby communities

Ø Free Computer Literacy Programmes conducted for woman and children

from the nearby communities

45



Ø Tree plantation drive conducted in nearby schools

Ø Awards given to meritorious students from nearby schools

Ø Environment awareness camps and free PUC camps conducted for students

in nearby colleges

Ø Save the Girl Child campaign organized

Ø Free raincoats distributed in nearby communities

Ø Study visits organized for school children and women group from the

nearby communities

Ø Workshops on self-employment and creation of self help groups, organized

for women from nearby communities

Ø Public Newspaper stand created for nearby communities

Ø Conducting Cricket Matches in surrounding communities

Ø Tree plantation encouraged by distributing saplings Ø Free pollution check of two wheelers for students organized.

Ø Free Health check for poor sections of surrounding community organized.

Ø Maintenance of roads adjoining Company’s plants

Ø Rs 700,000 to CII Kashmir Earthquake Relief Fund.

Ø Rs 500,000 to INTACH for River Cleaning Project.

2.7.1. COMPANIES CONTROLLED BY THE BUSINESS HOUSE

2.7.1.1) KIRLOSKAR BROTHERS LIMITED:-

Ø Industrial Pumps

Ø Projects and Engineered Pumps

Ø Agriculture and Domestic Pumps

46



Ø Valves

Ø Hydro Turbines

Year of Establishment : 1888

Year of Incorporation : 1920

Main Product : Centrifugal Pumps

Sales turnover (2006-07) : Consolidated Sales Rs.17878 million (US $ 436

million)

Total Sales : Rs. 15808 million (US $ 386 million)

Exports : Rs. 2266 million (US $ 55 million)

Manufacturing plants and Year of Establishment:

Dewas (1962) (Madhya Pradesh),

Kirloskarvadi (1910),

Kondhapuri (2001),

Shirval (1992) (Maharashtra)

Marketing Network : Domestic Regional Offices 16

Ahmedabad, Bangalore, Baroda, Bhubaneshwar, Calcutta, Chennai, Indore,

Jaipur, Kochi, Lucknow, Mumbai, Nagpur, New Delhi, Pune, Ranchi,

Secunderabad

Overseas Offices : Ajman, Cairo, Johannesburg, Miami, Nairobi, Phnom Penh.

Dealers: Domestic 900

Dealers: Overseas 45

47



2.7.1.1 EVOLUTION OF KIRLOSKAR BROTHERS LIMITED

48



2.7.1..2) Kirloskar Oil Engines Limited:-

Ø Diesel / Gas Engines

Ø Thin Walled Bearings

Ø Engine Valves

Year of incorporation: 1946

Sales Income, year ending March 31, 2007: USD 446 Million

No. of employees: 2,000 approx

Business areas

We are the acknowledged leader in Engines, Engine Bearings, Engine Valves,

Diesel Generating Sets, and Grey Iron Castings. Engines are the preferred

choice when it comes to powering Agricultural Machinery, Construction &

Material Handling Machinery, Marine applications and equipment used by

Armed Forces (Military).

Diesel Generating Sets in the range 2 Kva to 6 MW are preferred by the

industry at large, households and the service sector comprising of banks,

telecommunication establishments, commercial use buildings, hotels and

restaurants. We also offer generating sets over 1 MW that run on Heavy Fuel

Oils. Similarly, Engine Bearings and Engine Valves are the chosen ones for

OEM use in automobiles and other engines.

Product range

Product range includes Diesel Engines, Irrigation Pump sets, Diesel

Generating Sets, Engine Bearings and Engine Valves and Grey Iron Castings.

49



Chairman & Managing Director

Mr. Atul C. Kirloskar

Joint Managing Director

Mr. Gautam Kulkarni

2.7.1.3) KIRLOSKAR FERROUS INDUSTRIES LIMITED:-

Ø Grey Iron Castings

Ø Pig Iron

Product range

Grey Iron castings: 1 kg - 500 kg single piece weight

S.G Iron castings: 1 Kg ~ 70 Kg single piece weight

Investment castings: 1 gram ~ 1 Kg single piece weight

Pig Iron: Foundry Grade, S.G. Iron Grade & Basic Grade

Chairman & Managing Director

Mr. Atul C. Kirloskar - Chairman

Mr. R. V. Gumaste - Managing Director

Manufacturing units

Kirloskar Ferrous Industries Ltd., Bevinahalli Village (Near Hospet)

Kirloskar ferrous Industries Ltd., Solapur

50



Year of establishment: 1991

Sales turnover 2006-07: INR 5,251 Million (Net)

No. of Employees:

1,349

Values:

To achieve the mission and vision, KFIL would pursue following values:

Ø Customer Orientation.

Ø Vendor Development (Critical link in the business)

Ø Development of Human Resource (Trust, Positive attitude, Integrity,

Team-Work, Respect for individual, concern for quality, cost, 5S,

Safety, a personal habit, Being proactive, Solving problems,

Networking, Working for WIN-WIN agreements, continuous

improvement and result oriented)

Ø Process & Product excellence.

2.7.1.4) KIRLOSKAR PNEUMATIC COMPANY LIMITED:-

Ø Reciprocating Compressors

Ø Screw Compressors

Ø Turbo Compressors

Ø Industrial and Marine Gears

Ø Air Conditioning & Refrigeration Projects

Ø Ice plants

51



Year of incorporation: 1958

No. of employees: 900

Kirloskar Pneumatic Company Limited (KPCL) is a part of ‘Kirloskar Group’

one of the largest engineering Conglomerate in India in the field of

Refrigeration, Gas and Air Compression, Fluid handling, Prime movers and

transmission.

(KPCL) is known since 1958 as the leading manufacturer of a wide range of

Customized refrigeration systems, Packages, Engineered Sets and Open type

Reciprocating refrigeration Compressors. KPCL has countrywide Sales &

Service Network for upkeep of every refrigeration System/package it builds &

Compressor manufactures. The International Network in the Middle East,

Vietnam, Cambodia, Africa, and Australia has resulted in Customer satisfaction

abroad through trouble free operation of our KC series Open type

Reciprocating Industrial Refrigeration Compressor. With over 24,000 Open

type Reciprocating Refrigeration & AC Compressors working satisfactorily all

over the world, today we are one of the World’s largest Compressor

manufacturer in the field of Industrial refrigeration.

KPCL has successfully build & commissioned more than 1500 Refrigeration

Systems/packages in India & Abroad since its Commencement in 1969 for

System engineering Contracting operation Today, KPCL offer unmatched

technical expertise in the Refrigeration technology over the pass two decades &

today this technical expertise and manufacturing capability is recognized world

over by our competitors and customers alike.

52



In early 80’s KPCL was licensee of Howden Compressors Ltd., UK (HCL) for

the manufacturing, marketing & Packaging of Screw Compressors, in India.

They then progressed to become a leading packager of twin-screw compressors

manufactured by Howden Compressor Ltd for Refineries, Petrochemicals,

Naval Application, Dairies, breweries etc.

Their focus has been to ensure that they meet their commitments to customers

with emphasis on delivery and quality. Their Corporate Quality Policy has

reaffirmed this commitment.

2.7.1.5) KIRLOSKAR EBARA PUMPS LTD.1988:-

JV KBL: 45%, Sales Rs. 720 M

Ø API Process

Ø Boiler Feed Pumps

Kirloskar Ebara Pumps Limited (KEPL) was established on 13th January 1988

as a Joint Venture promoted by Kirloskar Brothers Limited (KBL) and Ebara

Corporation with a mission to manufacture and supply of rotary equipments

like Process Pumps, Steam Turbines, Fans, Blowers etc. required for critical

applications in Hydrocarbon Processing Industries and for Power Projects.

Business areas

The process pumps manufactured are required by hydrocarbon industries for a variety

of applications covering critical areas involving handling of process water,

petrochemicals, hazardous and toxic liquids at moderately high temperatures, as well

as for cryogenic applications. These pumps have major markets in refineries,

53



petrochemical industries, fertilizer industries as well as nuclear power plants. The

multistage pumps have applications mostly in power generating sector as well as

reverse osmosis process

54



2.7.1.6) KIRLOSKAR CHILLERS PVT. LTD. 1995: -Chillers

2.7.1.7) TOYOTA KIRLOSKAR MOTORS LTD. 1997: -

Ø High End Light Motor

Ø Vehicles (Innova & Corolla)

Toyota Kirloskar Auto Parts (TKAP) plans to increase production of manual

transmission parts to 2.3 lakh units next year and wipe out losses of around Rs 70 crore

in another two-three years.

The increase in production to 2.3 lakh units from the existing 1.7 lakh units will also

depend on the finalisation of the small car project of Toyota Kirloskar Motor. The small

car project is expected to be finalised in another six months.Another Rs 40 crore may

be needed for expanding the existing capacity, the official said.

TRANSMISSION PARTS

The transmission parts are manufactured at both TKAP as well as at Kirloskar Toyoda

Textile Machinery. Toyota has invested around Rs 400 crore in both the plants for

manufacturing the transmission parts. The total revenue of TKAP is around Rs 500

crore for 2005-06.

TKAP is a global resource for the International Motor Vehicle project, making and

supplying R type manual transmission to seven vehicle assembly plants of Toyota

across the world. It is also considered the first Indian auto transmission component

maker who will be a global source for a tier 1 component.

55



OTHER PRODUCTS

Apart from manufacturing manual transmission parts, TKAP also makes propeller

shafts and front and rear axles. Toyota Motor Corporation has a 64 per cent stake in the

joint venture while Toyota Industries Corporation has a 26 per cent stake. The rest is

with Kirloskar Systems.

The company would provide sales and service for a wide range of material handling

equipment produced at their Takaham plant in Japan. The joint venture expects 25 per

cent increase in revenues to around Rs 220 crores in 2006-07. The company expects to

sell between 800 units and 1,000 units of the newly launched forklifts by 2010.

2.7.1.8) TOYOTA GOSEI 1998:-Non-Metallic Components

2.7.1.9) DENSO KIRLOSKAR 1998:-Engine Radiators

2.7.1.10) TOYOTA KIRLOSKAR AUTO PARTS 2002: Metallic Auto

Components

2.7.1.11) SPP PUMPS LTD. 2003: KBL 97.5%, Sales Rs. 2180 M

Ø Centrifugal Pumps &

Ø Packaged Pumping Systems

2.7.1.12) KIRLOSKAR CORROCOAT PVT. LTD. 2006: JV KBL: 65%,

Sales Rs. 92 M

Ø Anti-Corrosion Coating Products

56



2.7.1.13) Aban Construction Pvt. Ltd. 2006: Sales Rs. 1092 M

Ø Civil Construction & Pipelines

Kirloskar Brothers Ltd. (KBL has acquired 100 % of the equity share capital of the

Chennai based Aban Constructions Private ltd. Aban Constructions Private Ltd. a part

of the well known Aban Group of companies, Chennai was set-up in 1969. It is mainly

into the business of oil and gas cross country pipe fines and civil construction projects

such as tunnels, bridges and roads, 'water and sewerage, and other industrial plants. The

present turnover of the company is about Rs 90 crores. The company caters to various

reputed customers such as IOCL, GAIL, SPCL, Port Trusts and State Electricity Boards

and so on. With this acquisition the company is poised to become Engineering,

Procurement and Construction Company with the opportunity to participate in the Oil

and Gas sector, therefore achieving its objective of synergy of operations along with

diversification.

57



2.7.2 EXPORT EARNINGS

In the year under review, there was a growth of 8% at Rs. 1,390 million in exports of

company. The company believes that the momentum in exports established by the

cumulated annual growth rate (CAGR) of 32% over last 3 years will continue. Growth

in sales by developing OEM customers was 88% in this year as compared to previous

year and will form a larger share of exports.

The sales through distributors in the traditional markets grew by 8% in this year as

compared to previous year. The auto component business recorded a growth of 40%

and increased its presence in the after market segment in Middle East Asia and Europe.

The Export Oriented Unit (EoU) with capacity to manufacture 12,000 generating sets

per year is being set up to cater to the growing sales.

The company has created has created a strategic business unit for exports to have

focused attention on important growth of market

Group Exports

1,046 1,052 1,275

3,8844,432

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

2002 2003 2004 2005 2006

58



2.7.2.1 MARKET PRESENCE ACROSS SECTORS

59



2.7.3 TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION (A) RESEARCH AND DEVELOPMENT (R&D)

Specific areas in which R&D carried out by the Company

Ø Development of engines for power generation to meet EURO-COM Stage II

emission norms.

Ø Finalized on specific sets of engines and Gensets working on Alternate fuels like

CNG and formally launched them.

Ø Development of small portable pump set for agricultural market is in advanced

stage of validation after product clinic.

Ø High horse power engine has completed the test bench evaluation and would be

ready to go to field trials shortly.

Ø Research project for preparedness to meet US 2014+ emission norms, on

development of a new Combustion technology (HCCI) through a joint

development project with Cambridge University.

Future Plans for Action

Ø Development and stabilize the R&D facilities for development of new materials

and processes.

Ø Product portfolio optimization through development of high power engines.

Ø In view of new norms in November 2007, update the emission status of present

products.

Ø Tailoring of engines to meet new markets.2

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INNOVATIONS LATEST PATENT

• A US patent has been awarded for

Siphon creation and breaking

arrangement designed by KBL for

Concrete volute and vertical turbine

pumps for Sardar Sarovar project.

This energy efficient siphon

arrangement provides:

Ø Reduction in installed power by

8.5 MW

Ø Energy saving of 34.96 million

units per annum

Ø Saving in electricity cost by

Rs.12.23 crores per annum

· First and only Indian Pump Company to launch FM approved, UL listed Fire

fighting pumps in India bringing world class safety norms in India

· Increasing business potential from building sector e.g. airports, ports, malls,

multiplexes, hotels, hospitals, …

• Small Vertical Turbine Pump Range introduced

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2.8.1 IMPACT OF LPG ON THE CURRENT BUSINESS

AND FUTURE PROSPECTS

In the context of globalization of Indian economy Kirloskar Brother limited felt the

need for upgradation of technologies and capabilities for manufacturing compressors.

After negotiation with Copeland Corporation, U.S.A., it was decided to bring in the

state of the art technology in to a new joint venture company.

Kirloskar Copeland Limited, the joint venture company took over the compressors

division ( at Karad and Atit ) of Kirloskar Brothers Limited from 1st April 1993.The

formation of this joint venture company is a step towards the commitment to offer latest

and advanced technology product to the customer’s .It will be possible to offer cost

effective, environment friendly and energy efficient design to meet customer

requirement. Thus Kirloskar Copeland Limited will continue to retain its place as

market leader.

Copeland Corporation of U.S.A. is a subsidiary of Emerson Electric Company, U.S.A.

It is the largest compressor manufacturing company in the world and pioneers of the

world’s most advanced “Scroll” compressor technological innovations.

Kirloskar Brothers Limited a leading engineering company has been in the forefront of

Refrigeration and Air conditioning industry in India since last many years. Kirloskar

Brothers Limited (KBL) was started in 1888 and incorporated in 1920. KBL began its

activities with the manufacture of iron ploughs and chaff cutters and soon its products

created a revolution in agriculture implements and methods used in those days.

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Kirloskar Brothers Limited identified changing needs and shifted its manufacturing

focus. Today, it is the largest manufacture of a variety of pumps, valves, CNC machine

Tools, and Hermetic Compressors and Agricultural implements in India. Kirloskar

Brothers Limited started production of Hermetic Compressors way back in 1966 at

Kirloskarvadi in technical collaboration with Tecumseh Products Company, U.S.A.

when it was decided to establish a separate division for Hermetic Compressors

production, about 16 acres of land was procured near Karad on Dhebewadi Road, one

km off the Pune-Bangalore National Highway. After the completion of the factory

building in 1971, the compressor manufacturing activity was shifted to Karad.

Sophisticated modern machinery, excellent engineering facilities, trained and highly

skilled manpower resources helped the division achieve and maintain a high standard of

quality, as well as adapted imported technology to Indian conditions.

After the formation of joint venture with Copeland Corporation, U.S.A., the state of the

art, ultra modern plant was established at Atit. The new manufacturing plant is focused

on state of the art products like CR6, CK3 and Semi hermetic.

KCL caters to various Original Equipment Manufactures (O.E.M.)engaged in

manufacture of Air-conditioning and Refrigeration appliances such as Refrigerators,

Deep Freezers, Water Coolers and Room Air-conditioners.

The product is well established in the market for quality and reliability. The product is

also certified by Bureau of Indian standards .In recognition of the performance of this

Division it has received National Productivity Awards. KCL has been exporting

products to various Countries with Air conditioning and Refrigeration Appliances.

63



2.8.2 FUTURE PROSPECT AND OUTLOOK

1 .Kirloskar brother has taken over the management of Kolhapur steel limited (TKSL)

ON 10TH SEPTEMBER 2007.

2. The company has acquired 100 % equity share capital of Gondwana Engineers

private limited for a total consideration of Rs 76.36 million. The company has executed

the necessary share purchase agreement to that effect at Pune. Gondwana Engineers

private limited (G.E.P.L) is the company started by M.r S.D Shangarbawar a technocrat

in the year 1982.

3. Kirloskar group of companies has now entered with joint venture with Toyota

motors. Toyota plans to increase its market share in the MUV and car markets

alongside increasing productivity. Toyota plans to increase 10 % per year in the future.

Toyota will also plan to continue working with component manufacturers to help and

guide them on quality, cost and delivery. Toyota plans to invest us$ 28.3 million to

increase production capacity from 45000 to 60000.

4.” Focus Africa “campaign:

(a) Identified and looking at Africa as future continent.

(b) The concept of Green revolution in Africa is introduced by Kirloskar brothers.

5. New opportunity – Nuclear power:

(a) KBL- one of the only three manufacturers of primary moderator circulation canned

motor pump over 200 kW.

(b) Indo-us nuclear treaty to open up huge opportunity for KBL.

(C) Bechtel association and recent order will be an added advantage.

64



6. Kirloskar is now going to launch world largest pumping scheme.

Scheme include –

-26 concrete volute pumps.

-22 vertical turbine pumps

- 4, 10000 lit/sec

- 4620 town and villages

- 5.4 lakh hectares under irrigation.

-5 pumping stations and 3 power stations.

-Drinking water to over 30 million people.

KBL conceived and implemented this scheme on Engineering, procurement and

construction basis.

65



( 2.9) MILESTONES

1912 The Kirloskar Group enters the field of Post Harvest Machinery manufacture

with the establishment of G.G. Dandekar Machine Works Ltd.

1946 Kirloskar Oil Engines Ltd. established.

1949 5 hp Peter type engine manufactured at KOEL

1954 1st 5 engines exported to Germany

1957 Manufacture of engine half bearings started at KOEL

1960 Collaboration agreement between KOEL and MAN-Germany (40 to 300 hp

engines)

1964 Poona Industrial Hotels Ltd. established.

1967

G.G. Dandekar Machine Works Ltd. enters into technical collaboration with

F.H. Schule GmbH, Germany for manufacture of modern rice milling

machinery.

1977 Licence agreement between SEMT Pielstick of France and KOEL for the PA

series of compact marine engines.

66



1991 45 types of engine bearings and bushes specially developed and

exported to MIBA Glietlager AG, Austria by KOEL's Auto

Components Division.

1993 KOEL's Auto Components Division became the first Indian company

in the bearings industry to receive ISO 9001 certification.

1994

Kirloskar Ferrous Industries Ltd. established. : Crankcase machining

in line facility for Pielstick engines acquired by KOEL - largest in

India, KOEL manufactures the first PA series heavy fuel engines in

India - the first such series designed by SEMT Pielstick.

1996 R1040 series of water-cooled engines (15-125 hp) developed at

KOEL's Techcentre, KOEL celebrates 50 years of operations,

Kirloskar Middle-East established in Ajman, U.A.E.

1997 Kirloskar Filters Ltd. merged with KOEL in August. A new company

Kirloskar Knecht Filters Ltd. was formed in October. : Launch of

A17X half bearings. : Kirloskar Briggs & Stratton Power Equipment

Pvt. Ltd. established in collaboration with Briggs & Stratton, U.S.A.,

1979 KOEL gets licence to manufacture engines up to 3000 hp in collaboration with

SEMT Pielstick, France, KOEL introduces Aluminium Tin Bearings.

1989 KOEL signs collaboration agreement with Deutz AG, for manufacturing air-

cooled engines under technical licence.



for the manufacture of petrol/kerosene engines, gensets and

pumpsets.

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3.1 FUTURE PROSPECT AND OUTLOOK 1. Future Plans As a part of kirloskar’s growth strategy, KBL is targeting markets in Europe, the USA, Africa, and South East Asia. It has as a strong brand presence in the EU through various tie-ups with leading suppliers. The company is planning to increase its focus on special production. Kirloskar Brothers Limited in the UK SPP Pumps Limited

SPP Pumps Limited UK is a subsidiary of KBL India. The company has been

manufacturing pumps for over 100 years in the UK, and it was acquired

by KBL for approximately EUR 10 million. It is among a the significant players in

the fire fighting pump packages, lowest life cycle cost series pumps of vertical

mixed flow type & horizontal split case type for water circulation, and the

contractors pumps.The company’s product range also includes water supply,

circulation and distribution, dewatering, drainage, and irrigation pump systems.

It employs approximately 120 personnel and generated revenues of

approximately EUR 44 million in 2005-06. SPP Pumps Ltd. has also

established a facility in Atlanta, USA for manufacturing fire-fighting pump

packages. It has an office in France, through which it supplies its products

across Europe.

Kirloskar Corrocoat Pvt. Limited

Kirloskar Corrocoat Pvt. Ltd. is a joint venture between KBL and Corrocoat Ltd. UK. It

specializes in manufacturing corrosion-resistant products and also undertakes turnkey

projects for various coating applications. The company provides high-quality products

and services to diverse industries, including power generation, oil and gas,

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petrochemicals, marine, water and wastewater, general industry, etc. This association

will facilitate the targeting of the anti-corrosion market in a focused manner, thereby

enabling a gain of substantial presence in the EU market.

Kirloskar Brothers Ltd’s future plan with EU Countries

KBL has a strong presence in the centrifugal pump market in the EU.The company’s

products are projects such as government contracts, which will utilize the company’s

products. KBL has plans to further reduce the life-cycle cost of its pumps to become

more competitive in international markets.

The top management of Toyota Kirloskar Motor Private Limited met the Chief

Minister N.Dharam Singh and Industries Minister P.G.R.Sindhia here on Tuesday

fuelling speculation about the car makers plan to expand operations by setting up a

second manufacturing unit in the State with an additional investment of Rs.1,500

crores.

However, the delegation of the joint venture between Japan's largest carmaker, Toyota

Motor Corporation (99 per cent equity) and the Kirloskar Group (one per cent stake),

was tight-lipped about the meeting attended by company's Managing Director, Atsushi

Toyoshima, among others Able to produce good quality vehicles according to

production plan even with alterations included. No TMC support required for mass

production. According to plan able to implement division of labor in production

preparation able to produce good quality vehicles.

‘Focus Africa’ campaign:

(a) Identified and looking at Africa as future continent.

(b) The concept of Green revolution in Africa is introduced by Kirloskar brothers.



New opportunity – Nuclear power:

(a) KBL- one of the only three manufacturers of primary moderator circulation

canned motor pump over 200 kW.

(b) Indo-us nuclear treaty to open up huge opportunity for KBL.

(c) Bechtel association and recent order will be an added advantage.

Kirloskar is now going to launch world largest pumping scheme.

Scheme include –

-26 concrete volute pumps.

-22 vertical turbine pumps

- 4, 10000 lit/sec

- 4620 town and villages

- 5.4 lakh hectares under irrigation.

-5 pumping stations and 3 power stations.

-Drinking water to over 30 million people.

KBL conceived and implemented this scheme on Engineering, procurement and

construction basis.

2. Factors of future prospectus (1) Cost

(2) Quantity

(3) Quality

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(4) Global Competitiveness

(5) Safety the Environment

(6) Self-reliance

(7) Human resources Development

(8) Engineering Development

(9) Secure strong Capacities/ Capabilities to support Future growth

(10) Further growth of the Next generation

4.2 SUCCESSION PLANNING

Business succession planning involves planning for the smooth continuation and

success of a business which depends greatly on the availability of competent people. Be

it profit or non-profit organization, one of the concerns is there may be no successor to

drive it once the leader or key person leaves – either by choice or by circumstances.

Without succession planning, a business that has become successful can just as easily

fall. The business grows because there is a leader (probably the owner) with experience,

drive and ability. Without proper succession planning, the future success of the business

is left to chance once that leader is gone.

Under such a circumstance, if it succeeds at all, it is by default rather than planned.

That is not all. The passing of the baton from one generation to the next is often

clouded by the stakeholders’ differing views and agendas. Without proper planning, the

clashes of views and agendas can pull the business in several directions and this may

wreck an otherwise viable business.

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4.2.1 Succession planning of Kirloskar group of companies

It was in the mid-1920s that Laxmanrao Kirloskar started manufacturing world class

diesel engines for the first time in India. Sticking largely to engineering related

products, it has grown over the next three generations. A majority of its revenue comes

from its core businesses of castings and forgings, pumps, engines, electric motors,

power equipment, and compressors. During 1956-80, the group was led by SL

Kirloskar. The group has been conservative in growth and has closely held ownership

within the family. In fact, the group turnover has come down from Rs.9.50 billion in

1999 to Rs.7.45 billion in 2004, with the net worth also depleting simultaneously

While the family is unified, and the six members of the fourth generation in the age

group of 41-49 are actively involved in business, they have not embarked on any

aggressive growth options. The group is led by the last member of the third generation,

who is now 54 years old. He has worked towards synergizing relationships among

family members and making them think as a group.

Although all the male members of the fourth generation are actively involved in

managing group companies, they have developed mechanisms for mutual consultation

regularly. Their exposure and experience with TQM methods from collaboration with

Toyota, Japan provided all of them with a common platform to compare and exchange

notes. Their long association with the companies and their non-family manages have

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helped the group work as a single entity. While this has helped build smooth internal

synergies, it is found to be inadequate to build long term business competitiveness



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4.1 STALWARTS OF KIRLOSKAR GROUP OF COMPANIES

Ø Shantanurao Laxmanrao Kirloskar

Founder, Kirloskar group

Born - 28th May

, 1903

Died - 24 April, 1994(aged 90)

Spouse -Yamutai Kirloskar

Children - Chandrakant Kirloskar & Srikant Kirloskar

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Ø Sanjay Kirloskar : Chairman and Managing Director of Kirloskar group

Born – 22nd march, 1957

City - Nagpur, India

Salary - Rs.275 million

Children - Alok Kirloskar & Rama Kirloskar

Ø S.V. Paradkar

Chairman Kirloskar Ebara Pumps Limited

Ø M.R Atul .C. Kirloskar

Chairman and Managing Director

Kirloskar Oil and Engines Limited

Ø Gautam Kulkarni

Joint Managing Director

Kirloskar Oil and Engines Limited

Ø M.R H.R Mustikar

Managing Director

Kirloskar Pneumatic Company Limited

Ø M.R R.V .Gumaste

Managing Director

Kirloskar Ferrous Industries Limited

Ø M.R S, K. Sonapati

Joint manager

Ø Kirloskar Middle East FZE

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4.2 CONCLUSION

The Kirloskar Group (consisting of Kirloskar Brothers, Kirloskar Oil Engines,

Kirloskar Ferrous Industries, Kirloskar Pneumatic Company, Kirloskar Ebara

Pumps Ltd., Aban Construction Company, SPP Pumps (UK), Gondwana

Engineers Ltd, and The Kolhapur Steels Ltd) is India's largest Engineering and

Construction Conglomerate with sales exceeding $2 Billion. The Kirloskar Group

today exports to over 70 countries and has a brand name to reckon with, especially

within India and over most of Africa, South East Asia and Eastern Europe. The

flagship & holding company, Kirloskar Brothers Limited established in 1888, is

India's largest maker of Pumps and Valves and also undertakes construction

projects through its subsidiary Aban Construction. It is headed by Mr. Sanjay

Kirloskar.

The Kirloskar group of companies was one of the earliest industrial groups which

made a mark in the engineering industry in India. The group produces pumps,

engines, compressors, lathes and electrical equipments like motors, transformers

and generators (it is the world’s largest gensets manufacturer). While Laxmanrao

Kirloskar established the group, his son S. L. Kirloskar played a major role in its

rapid growth.

S. L. Kirloskar was a man who transformed his vision into a promising and

thinking reality, of application of appropriate technology, customer satisfaction

and dauntless integrity. SLK was a global thinker who had the courage and the

confidence in his own country even in the pre-independence era. In 1974, in

cooperation with Deutz-Fahr of Germany, Kirloskar began manufacturing tractors.

They have since ceased tractor production.

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In 1988, Rajiv Gandhi, the then Prime Minister of India released a

commemorative postage stamp marking the Kirloskar Group's 100th

anniversary.

They are made up of 8 major group companies, who are players in major sectors

like manufacturing, oil and gas, power, construction and mining, agriculture,

industry and transport each led by the best engineering and managerial talent in

India. In addition to engineering, they also have interests in civic utility systems

and in Information Technology and communication. These 8 companies form the

core of Kirloskar group. Each company is a renowned name in its own area of

operation and is respected world wide for its services and products. For them

manufacturing is just not limited to our factory premises and our products. It is

also about world class service.

Kirloskar is the company which lives up its corporate social responsibility. When

the disaster of Tsunami occurs in country then on behalf of the Kirloskar group of

companies, Sanjay C Kirloskar handed over a cheque of Rs. 6.8 Million,

contributing to the Prime Minister’s Relief fund, as aid to the tsunami victims to

Dr. Manmohan Singh, honorable Prime Minister of India.

Recently, KBL and Vikas Charitable Trust jointly organized an Environmental

Awareness Programme for high school students of Andhali, Palus,

Ramanandnagar, Kundal and Takari. Issues like water harvesting, tree plantation,

cleanliness, conservation of natural resources were addressed by S Y Aphale, D M

Kulkarni and R M Kamat. The programme received an enthusiastic response from

teachers as well as students.

In the last couple of years, Kirloskar group has worked relentlessly to increase

exports in sustainable way and also de-risk them by concentrating on sales to

OEMs and institutions. Once such Breakthroughs are achieved; the revenues are

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stable year after year. Towards this objective, Kirloskar has positioned itself as

cost competitive producer of high quality products and is constantly on look out to

increase exports. A significant step in that direction was announced today by

Kirloskar –acquisition of certain assets and businesses of SPP Pumps Ltd. in

United Kingdom through a joint venture company which would be henceforth

called SPP Pumps Ltd. SPP Pumps Ltd. was a part of Thyssen Bornemiscza group

in UK so it can be assumed that Kirloskar is the company which has great future

because of its efficient management team and great vision.

CURRENT HAPPENINGS AT KIRLOSKAR

Business restructuring plan does not boost Kirloskar Brothers

Kirloskar Brothers declined 1.77% to Rs 222.50 at 15:07 IST on BSE even as the company said it is reorganising its business into nine divisions to achieve a revenue target of $1 billion by 2011.

Meanwhile, the BSE Sensex was down 133.26 points, or 0.83%, to 15,929.92, on weak cues from global markets. US stocks slid on Monday, 2 June 2008, on renewed fears the credit crunch has yet to run its course after Standard & Poor's downgraded debt ratings of three big securities companies and Wachovia, the fourth-largest US bank, ousted its chief executive.

On BSE, 4,275 shares were traded in the counter. The scrip had an average daily volume of 27,386 shares in the past one quarter.

The stock hit a high of Rs 225 and a low of Rs 215 so far during the day. The stock had a 52-week high of Rs 527 on 3 October 2007 and the stock hit a 52-week low of Rs 206.40 on 24 March 2008.

The mid-cap company had underperformed the market over the past one month till 2 June 2008, declining 18.01% compared to the Sensex’s decline of 8.73%. It had also underperformed the market in the past one quarter, declining 29.87% compared to Sensex’s decline of 1.69%.

The company’s current equity is Rs 21.15 crore. Face value per share is Rs 2.

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The current price of Rs 222.50 discounts its Q4 March 2008 annualised EPS of Rs 19.92, by a PE multiple of 11.17.

The business units will deal in products, services and systems and will include irrigation and rural electrification, water resource management and oil and gas divisions. The reorganisation is effective from the first week of June 2008, the company said.

In May 2008, Kirloskar Brother received an order worth Rs 933.76 crore from the Andhra Pradesh state government's Irrigation & CAD Department for building a pump house.

On 15 April 2008, the company received a letter of intent for an order worth Rs 166.77 crore from Damodar Valley Corporation - Kolkata in respect of Koderma thermal power project.

On 1 April 2008, the company received a letter of intent for an order worth Rs 338.92 crore from the Government of Andhra Pradesh, Irrigation & CAD Department in respect of Rajiv Sagar Lift Irrigation project.

Kirloskar Brothers’ net profit rose 43.4% to Rs 52.66 crore on 26.9% increase in net sales to Rs 569.01 crore in Q4 March 2008 over Q4 March 2007.

The company is engaged in manufacturing and selling pumps and compressors. Products of the group include power driven pumps, valves, anti corrosion products, electric motors, spares and others. The group operates in three segments, namely, pump, compressors and others.

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