IMPROVING PRODUCT MIX (%)

Focus from project to product business

In a strategic move, we reduced our EPC business exposure over the last decade, while increasing contribution from services and other value-added products. We also heightened our focus on higher-margin profitable contracts in the water, power and irrigation sectors.

Our minimal exposure to low margin and working capital-intensive EPC projects led us to improve our working capital cycle and cash flows and maintain a consistent revenue stream. This strategic development promises a positive outlook on the overall business environment and creates multiple growth triggers.

We foresee a further improvement in our profitability based on an improved business mix of international operations, steady commodity prices, calibrated price enhancements, and an increased proportion of high-margin and reliable services businesses.

Direct Economic Value Generated and Distributed (KBL Standalone)

Economic Value distributed for Major Stakeholders (Standalone basis)

Domestic Subsidiaries and Associates – Economic Value Distributed

DELIVERING SUSTAINABLE RETURNS

We take great pride in managing our finances in a way that helps us deliver long-term growth and profitability. A strong balance sheet, which is an outcome of cost optimisation, and a diverse pool of cost-effective product offerings facilitates the company in exploring multiple opportunities in an ever-changing industrial landscape.

Our robust financial planning processes examine financial requirements for long-term operations and investments in current and future business sustainability besides development prospects.

KEY FOCUS AREAS FOR SUSTAINABLE RETURNS

1. RETURN-BASED APPROACH

Our competitive cost of production and value-added product mix drives our margin profile and Return on Capital Employed (ROCE). Our capital and resource allocation policy aims to generate consistent and strong returns for both the business and financial capital providers.

By producing our goods at competitive costs and offering a large portfolio of value-added products, we have improved our margin profile and raised the ROCE. Our primary objective is to provide all the resources necessary for our expanding businesses, including our standalone and subsidiary entities, in a manner that enables them to generate sufficient returns, and in turn, create value for all our stakeholders and shareholders.

2. PRUDENT CASH FLOW MANAGEMENT

We maintain a prudent equilibrium between our cash inflows and outflows and manage our capex requirement through internal cash accruals. We continue to generate positive cash flows and maintain sufficient liquidity to satisfy our current, anticipated and future cash flow demands.

3. OPTIMAL CAPITAL STRUCTURE

Focussed efforts to minimise our debt costs have led us to become a zero debt company, while providing us the latitude to pursue growth opportunities. Our conservative approach towards debt accumulation enables us to rely heavily on internal accruals to finance our operations and growth objectives.

4. VALUE CREATION

Our primary priority – an ongoing exercise – is to continue to create value for our customers and shareholders. We have implemented several measures to ensure timely and efficient product deliveries to our customers and maximise value creation, while also streamlining processes to implement operational efficiencies in multiple business domains.

5. COST-FOCUSSED STRUCTURE

Implementation of numerous cost-optimisation and backward integration initiatives that drive cost efficiencies have gained for our businesses global recognition in cost leadership. Effective supply chain management has ensured timely delivery of essential inputs, effective logistics and warehousing. An efficient working capital cycle has helped us to emerge as cost leaders in the manufacturing industry.

We are continually deploying and integrating new technologies into our business operations. Automation of processes have raised cost efficiency, resulting in reduced expenses and industry-leading quality.

DIVERSIFYING REVENUE BASE

We expect significant growth in our overseas services business as most of our international customers are increasingly outsourcing their requirement for maintenance and monitoring of the installed pumps. Our IoT-enabled platform and subscription-based services have helped us to diversify our total revenue base and enhance the overall margin profile.

TOWARDS FUTURE GROWTH

Our EBITDA is expected to increase due to factors such as declining commodity prices, improvement in the global supply chain, cost rationalisation measures and an increasing share of services revenue. Future growth at KBL will be driven by a healthy order book for our ‘Made-to- Order’ and ‘Engineered-to-Order’ products.

MAINTAINING PRODUCT COMPETITIVENESS

We have undertaken value engineering at the product level to reduce product weight and improve power efficiencies. To enhance product competitiveness in the market, the Company has further introduced on-line monitoring of pump performance and advanced manufacturing technologies such as three-dimensional printing, artificial intelligence, virtual reality, and Internet of Things.

Break-up of Group Revenue from Operations (%)

Note - The above numbers are on consolidated basis.

SUBSIDIARY COMPANIES

SHARE OF LOCAL SPENDING