analysts meet

7/27/2019 Analysts Meet

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Kirloskar Oil Engines Ltd.Welcomes you to

Analysts Meet

Vijay Varma,Senior Vice President

Pune, INDIAJuly 27, 2007


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Todays Discussion

Vision 2012 Concerns and Challenges

Our Markets Domestic and Export Domestic : Markets, Drivers and Competition Auto Components

Export : Markets and Drivers In-house Technology Development (R&E) Alliance with Waukesha

Financial Performance : FY07 and Q1, FY08 Questions

July 27, 2007 2Kirloskar Oil Engines Ltd.


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We will become a major Global Player in offhighwayengines and power generation businesses by

offering winning combinations of Quality, Cost andDelivery through innovation and unmatched service.We will be amongst the Top Five engine companiesof the world.While pursuing the above, we will continue toenhance the value of engine bearing and valvesbusiness.


Size of Indian off-highway engine market,FY07 : 5,700 INR CrFY12 : 11,500 INR CrEst. CAGR up to FY12 : 15%Source : KOEL Research

TargetTurnover byFY12 : 8,500INR Cr


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Growth Path


-

2,0004,000

6,000

8,00010,000

FY07 FY08 FY09 FY10 FY11 FY12

Present Products

INR Cr

Varsha Pump A350 engine Fire Pump

Engines

New Projects

CAGR 23%

CAGR 35%


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Concerns & Challenges

Leadership Development Improve Processes Order fulfillment and New

Product Development Strengthen Sourcing Indian and Global Complete CAPEX plan in time

Manufacturing Processes, and, Modern Plant and Machinery

Develop Sustainable Alternate Sources of Energy

GreenTech


Thereby, make KOEL a modern engine makerdiversified across geographies and markets


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KOELs Markets


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Major Markets - Engines

Domestic Agriculture Pumps and engines for Farm Machinery

Generating sets 3 to 30 kVA, 30 to 600 kVA, 2000 to6600 kVA Construction and Industrial Machinery Engines

Export Agriculture Pumps and engines for Farm Machinery Generating sets 10 to 600 kVA Construction Machinery Engines

Others Castings Division sold to KFIL Oil Trading Power Unviable. Thus, deemphasised



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Agriculture Engines and Pumps


Engines up to 20 hp

Water Cooled Air Cooled

Pumpsets


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Power GenerationEngines & Gensets


Engines

Liquid Cooled Air Cooled

Gensets

2 to 6 MW3 to 600 kVA


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Construction & Industrial - Engines


EnginesSeries

OEMCustomers :

Liquid Cooled

Air Cooled


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Domestic MarketsDrivers and Competition


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Agriculture : Drivers

4 to 100 hp engines and pumps Spend in agriculture and rural economy

Changing Farm Practices For 20 hp+ Farm Machinery

OEM relationships with Tractor and Harvestermanufacturers

Range Expansion, FY08 FY09

Compact Pumpset VarshaCompact high speed engines : 5 7 hp

Competition :Up to 20 hp:No national competitor. Only Regional competitors.New Segment of Compact Pumps developed by Chineseimports.20 hp+: Simpson & Co.



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Kirloskar Green Generating Sets3 - 30 kVA, 30 - 600 kVA, 2000 6600 kVA



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Domestic Market DriversPower Generation

Range 3 to 6600 kVA Investments in economy driven by growth and

optimism Lifestyle change Power Shortage and Last Mile unavailability of

quality uninterrupted Power Telecom, urbanisation, SEZs, townships,

commercial buildings


Range expansion to 1500 rpm 2.4 to 3.6 MW setsrunning on diesel and gas from FY10


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Up to 30 kVA Residences and Commercial Establishments

Rising disposable incomes and consumption Changing Lifestyle

Telecom is a big use r Many sold in semi-urban and rural areas

Competition :Mahindra and MahindraCumminsRegional competitors



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30 to 600 kVA Larger Commercial Establishments

Investments in manufacturing, textiles andgarments, auto components, InformationTechnology, Retail and such

Competition :

CumminsGreaves



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2000 to 6600 kVA Process Plants such as Cement, Textile Mills,

Chemical and Pharmaceutical Industries Specialised use, such as Standby Power for

Nuclear Power Plants

Competition :CumminsCaterpillarWartsilaOther Imports



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Fuel Options - Power Generation

New Fuels lower emissionGaseous Fuels

30 and 50 kVA Natural Gas sets introduced inmarket. Will expand range based on marketdemand

2.4 to 3.6 MW, alliance with Waukesha from FY10

Bio Fuels Biodiesels and Straight Vegetable Oils 15 and 45 kVA offered for cell sites In-house Generating sets on Biodiesels from 2008 Range will be expanded depending on market need

Developing Technologies to make bio fuelseconomically viable for sustainable use indecentralised manner grow and use locallyJuly 27, 2007 18Kirloskar Oil Engines Ltd.


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Domestic Market DriversConstruction & Industrial Machinery

Range 3 to 200 hp Investments in economy such as roads,

construction, infrastructure up-gradation andrepairs, SEZs, townships, commercial buildings Changes in method - road making and

construction, urban repairs and garbage handlingand such

KOEL engines are customised and have provedperformance on 100 applications

KOELs proven delivery performance over years KOELs proven performance on upgrades to meet

changing technical and emission requirements



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Domestic Market DriversConstruction & Industrial Machinery

Range 3 to 200 hpContractors ask for KOEL engines on machines due

to superior performance and after sales service

Range Extension5 7 hp compact high speed engines in FY08



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Domestic Market Drivers - Marine

2200 to 11000 hp engines for propulsion Technology is licensed from SEMT Pielstick

Preferred supplier to Indian Navy and Coast Guardfor 18 years

Order Board as on April 01, 2007:

Marine Rs. 250 Cr. Stationary Power Plants Rs. 110 Cr.

Competition :

MTU, Germany



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Export Strategy continues

Increase OEM business Consolidate and grow in our traditional markets

distribution in Africa and Middle East Increase Institutional Sales Keep strengthening and creating Sales and

Service Network We continue to receive repeat orders from OEMs

in Europe and China



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Export Market Drivers - Engines

Agriculture : Up to 20 hp engines and pumps Markets for Traditional Cast Iron engines in Africa

and Middle East. Such designs made only in Indiaand KOEL is the leader

Competition :Regional level engine manufacturers from India


Range Extension, FY09 :5 7 hp high speed engines

Compact Pumps Varsha


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Power Generation : 10 to 600 kVA 2007 Market is about 1 B USD in Africa and Middle

East (Source : Frost & Sullivan Report) 250 to 600 kVA range introduced in FY07 Value Proposition : Kirloskar Green generating

sets at competitive price Traditional European suppliers are quoting longdelivery times

KOEL is creating capacities to meet demand (EoUfor Gensets and Greenfield Engine Plant at Kagal)

Competition :European Generating set manufacturersJuly 27, 2007 24Kirloskar Oil Engines Ltd.


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Construction & Industrial Machinery :20 to 100 hp engines

Pump OEMs in Middle East, China and Europe


Range Extension, FY09 :

Engines for Fire Protection Pumps in Europe & USA


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New Products FY08 and beyondResult of in-house R&E

Result of in house R&E


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Result of in-house R&E(Indian Opportunity Size, Qty. / INR Cr, 2007)

Agriculture Market ( 350,000 / 280) : Varsha Compact Pumpset

Construction Machinery Market (30,000 / 100): Compact 5 - 7 hp high speed engineNatural Gas Engines (300 / 10): 35 and 55 kVA introduced in marketBiodiesel Engines (Market developing): 15 and 45 kVA offered for cell sites In-house generating sets to run on biodiesel from

Jan. 2008500 kVA manufactured engine (4000 / 450)

Present Share 20% with traded Engine: In-house designed and manufactured engine for

gensetJuly 27, 2007 27Kirloskar Oil Engines Ltd.


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Varsha for Agricultural MarketEntering New Segment

AV1XL

Varsha

For 12 to 18 m Head13 to 21.5 lps Discharge120 kg.750 - 800 cc / h Fuel Consumption

For 5 to 11.5 m Head3.3 to 13.5 lps Discharge60 kg.450 500 cc / h Fuel Consumption

J uly 27, 2007 28Kirloskar Oil Engines Ltd.


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Varsha Compact Pumpset

2007 Indian Market Size :350,000 Units / INR 280 Cr



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Compact High Speed Engine forIndustrial and Power Generation Market

TAF1

FA 350

Speed : 1500 / 1800 rpm6 / 7.5 hp164 kg.Generating sets and Construction

Machinery

Speed : 3000 / 3600 rpm5 / 7 hp44 kg.Generating sets and Construction Machinery


2007 Indian Market Size :30,000 / INR 100 Cr

Natural Gas Generators


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Natural Gas Generatorsdesigned in-house

35 and 55 kVA introduced in market

Range will be expanded based on Market Study J uly 27, 2007 31Kirloskar Oil Engines Ltd.

2007 Indian Market Size :300 / INR 10 Cr

Biodiesel Generators


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Biodiesel Generatorsdesigned in-house

15 and 45 kVA offered for Cellular Tower sites In-house generators to run on Biodiesel from 2008

Range will be expanded based on Market Study J uly 27, 2007 32Kirloskar Oil Engines Ltd.

2007 Indian Market Size :Market Developing

Alliance with Waukesha


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Alliance with WaukeshaProducts to market from FY10

Waukesha makes 1200 gas engines per year andis leading global player with 28% global share.

About 200 gas engines operating in India Gas Engine is most fuel efficient at 41 - 44%efficiency Vs. 40 - 41% of competition

Gas and Diesel engines have high power / weightratio

1500 rpm, 2.4 to 3.6 MW range providesopportunity to competitively price generating sets

as compared to present range at 1000 rpm Proven engine design of Wartsila, 600 engines

operating worldwide


Alliance with Waukesha


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WProducts to market from FY10

Exclusive manufacture for Global Markets of dieselengines for generating sets

In-house packaging of Gas generating sets for IndianMarket

Opportunity to supply diesel engine components andassemblies to Waukesha as several parts are common

for diesel and gas engines Manufacturing Feasibility Study in 6 months to decideinvestments and plant location


Opportunity size 2007*Diesel (Global) : 800 Units / USD 1.3 BGas (India) : 45 Units / USD 130 M* = Source Diesel & Gas Turbine and KOEL Research


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KOEL Sales Breakup

FY07 Vs. FY06, and,Q1, FY08 Vs. Q1, FY07

T i l g


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Terminology

Engines: 3 to 20 hp = Small Engines

20 to 800 hp = Medium Engines 2200 to 11000 hp = Large Engines

Agricultural machinery

Pumping sets, engines for Farm machinery suchas Tractors and HarvestersMobile Machinery

Construction and Industrial MachineryStationary Equipment Generating sets and such

Auto Components : Engine Bearings and ValvesJuly 27, 2007 36Kirloskar Oil Engines Ltd.

KOEL Sales


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Highlights FY07 Vs. FY06

Agriculture : up by 10% Cellular : up by 218%

Power Generation, other than Cellular : up by 46% Power Generation, 275 to 600 kVA : up by 39% Industrial & Construction : up by 50%

Tractors : up by 9% Exports : up by 8%

Auto Component :

Bearings : up by 17%, Valves : up by 22%. Growthcurtailed as unprofitable orders dropped

Increase in sales of Bearings to OEMs but drop in

After MarketJuly 27, 2007 37Kirloskar Oil Engines Ltd.

KOEL Sales Break up


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KOEL Sales Break-up

All in INR Cr, rounded off FY07 FY06 ChangeSmall Engines 361 256 41%

Medium Engines 1,199 793 51%Large Engines 124 100 24%Total Engines 1,685 1,148 47%Bearings 103 88 17%Valves 22 18 22%

Auto Component 125 106 18%Castings 51 66 -23%Fuel Oil 137 150 -9%Power 0 3 -100%

Total (Includes Inter-SBU Sales) 1,997 1,474 35%Inter SBU - Sales 114 79 44%Total External Sales 1,883 1,395 35%

Exports 143 132 8%Exports / Total External Sales 8% 9%

Sales FY07 (audited) Vs. FY06 (audited)

Sold to KFILw.e.f. Q4, FY07

Unviable.Stopped.


Engine Sales


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increase 28% by volume & 47% by value


Qty., rounded off FY07 FY06 ChangeSmall Engines 87,300 77,200 13%Medium Engines 77,200 51,600 50%

Large Engines 7 9 -22%Total 164,507 128,809 28%

Agriculture Engine Sales


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increase 10%


Qty., rounded off FY07 FY06 ChangeSmall Engine 45,300 41,000 10%

Medium Engines 14,500 13,000 12%Total 59,800 54,000 11%

INR Cr, rounded off FY07 FY06 ChangeMarketShare*

Small Engines 76 68 11% 27 - 30%Medium Engines 83 76 9% 65 - 70%Total 159 144 10%* = KOEL Research. In case of Medium Engines, share of

non-captive market

Relationship with PTL and SEL


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Relationship with PTL and SEL

KOEL has supplied engines to PTL from 1972 FY07 invoicing to PTL < INR 100 Cr

Engine Supply to PTL will continue Q1 sales lower as PTL was clearing inventory

SEL continue to receive Technology from KOEL Subject to Technology License

KOELs equity in SEL is of strategic importance


Power Generation


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Sales increase by 80%


Qty., rounded off FY07 FY06 ChangeCellular 22,000 11,100 98%PG non-Cellular 48,400 40,100 21%Total 70,400 51,200 38%


Cellular 270 85 218% 40 - 42%PG non-Cellular 498 341 46% 40 - 43%Total 768 425 80%* = KOEL Research

Industrial & Construction Machinery


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Sales increase by 50%


Qty., rounded off FY07 FY06 ChangeSmall Engines 10,300 8,000 29%Medium Engines 24,100 15,700 54%Total 34,400 23,700 45%


Small Engines 16 12 30% 55 - 60%Medium Engines 248 163 52% 52 - 56%Total 264 176 50%* = KOEL Research

Engine Bearings & Valves


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Engine Bearings & Valves

Unprofitable businesscurtailed in FY07

Working on globalalignments

Valves EoU starts invoicingin FY08


56% 59%

44% 41%

FY06 FY07

OEM Sales After Market Sales

88103

18

22

0

20

4060

80

100

120

140

FY06 INC Cr FY07 INR Cr

Bearings Valves

17%

22%INR Cr.


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KOEL Sales Breakup

Q1, FY08 Vs. Q1, FY07

KOEL SalesHi hli h Q1 FY08 V Q1 FY07


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Highlights Q1, FY08 Vs. Q1, FY07

Agriculture : up by 9% Cellular : up by 52%

Power Generation, other than Cellular : up by 23% Power Generation, 275 to 600 kVA : up by 88% Industrial : up by 57%

Exports : up by 12% Tractor : down by 49% - FY08 sales estimated to

equal to FY07.

Auto Component : Bearings : up by 17%, Valves : up by 22%. Growth

curtailed as unprofitable orders dropped


KOEL Q1, FY08 Sales Break-up


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Q , p

Q1, FY08 (Provisional) Vs. Q1, FY07 (Audited)

Sales, rounded off to INR Cr Q1, FY08 Q1, FY07 ChangeSmall Engines 90 81 11%Medium Engines 325 246 32%Large Engines 30 15 100%TOTAL ENGINES 446 342 30%BEARINGS 20 18 10%VALVES 4 5 -28%AUTO COMPONENT 23 23 2%EXPORT 33 30 12%CASTINGS 0 17 -100%FUEL OIL 18 56 -68%

POWER 0 0 -100%TOTAL INCLUDING (INTER SBU) 520 467 11%LESS INTERSBU 28 40 -30%TOTAL EXTERNAL 492 427 15%


Division Sold toKFIL w.e.f. Q4,

FY07Unviable. De-emphasised.


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Financial Performance

Capital Use


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p


-200400

6008001,0001,200

1,4001,6001,8002,000

050

100

150200250300

350400450500

FY03 FY04 FY05 FY06 FY07

BusinessTCE

Net Block

Net Current Assets

Turnover

All in INR CrTurnover

5 Yr CAGRTurnover 22%Business TCE 18%Net Block 24%Net Current Assets 8%

Margins & ReturnsBusiness ROCE is growing


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Business ROCE is growing


0%5%

10%15%20%25%

30%35%40%45%50%


RONW

ROCEBusiness ROCE

Operating Margin

Increase in Returns / Share


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-102030405060708090

100


EPSCash EPS

Book Value / Share

INR

5 Yr CAGREPS 46%Cash EPS 34%Book Value / Share 24%

Consistent increase in Profits


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-

500

1,000

1,500

2,000

2,500

3,000

-

50

100

150

200250

300

350


PBT

PAT

EBDIT

Operating EBDIT

Market Cap @year end

INR Cr

5 Yr CAGRPBT 58%PAT 44%EBDIT 35%

Operating EBDIT 60%Market Cap @year end 116%

Mkt Cap

Improving Employee Productivity


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-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

0

1

2

34

5

6

7


Turnover (INR M)/Employee

No. of Employees

CAGRNo. of Employees -4%Turnover (INR M)/ Employee 26%

Low Debt


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-

200

400

600

800

1,0001,200


INR Cr

Debt

Share holders fund


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Investments

CAPEX Plan FY08 FY10


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900 INR CrBreakup in Businesses

Breakup in years


58%24%

18%

FY08

FY09

FY10

16%

71%

13% Small

EnginesMediumEngines

LargeEngines

80% in Plant and Machinery

Interest and Depreciation


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Additionally, INR 11 Cr will be capitalised in FY08.Debt will peak in FY09 FY10.


INR Cr, rounded off FY07 FY08 FY09 FY10Interest & Financing Cost 14 38 68 68Depreciation 32 57 106 123 Total Financing Cost & Dep 46 95 174 191

Kagal Expansionto meet Rising Demand


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to meet Rising Demand

INR 550 Cr being invested Genset EoU : First Invoice made in July 2007 to

Chinese customer Engine Plant Medium Engines, and, New Products : Varsha - Compact Pumpset and

FA350 Compact high speed Engine Expect to fully utilise genset and engine

capacity in 3 to 4 years

Castings capacity increase at KFIL in progress


We are shifting manufacture of traditional Small Enginesto Rajkot as good supplier base is available there. We

presently make these in Phursunghi in Pune.

Holding in KFIL


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KFIL is secured source of castings for makingengines Current holding is 48% On Conversion of Warrants, holding will be 52%


Cautionary Statement


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Statements in this presentation, particularlythose which relate to managements views andanalysis, describing the Companys objectives,

projections, estimates and expectations mayconstitute forward looking statements withinthe meaning of applicable laws and regulations.

Actual results might differ materially from thoseeither expressed or implied.


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Contact at Kirloskar

Vijay Varma, Senior Vice President,Kirloskar Oil Engines Ltd., Pune 411003, INDIAE-mail : [email protected]

Secretary : Ms. Uma Murali ([email protected]),Phone : +91(20)6608 4109 (DID)

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