Kennametal India Ltd
Chairman Speech
"Your Company's growth was driven by strong domestic demand
and the team's commitment to executing strategic initiatives."
B. Anjani Kumar
Chairman
Dear Shareholders,
On behalf of the Board of Kennametal India Limited, I am privileged to
present the 58th Annual Report of the Company for the financial year ended June 30, 2023.
I am pleased to share that your company continued its growth momentum over the previous
year, clocking total sales of Rs 10,771 million which was a growth of almost 9%. The
growth was driven by strong domestic demand and the team's commitment to executing
strategic initiatives. In line with this, we invested in capacity building by establishing
the new master inserts plant within our Bengaluru manufacturing facility, thereby
improving our value to customers in India and abroad.
Global Economy an overview
Following a year that saw the peak of global economic turmoil on the
back of COVID aftereffects and geopolitical tensions, FY 22-23 reeled from the spillover
of these uncertainties and continued to slow down. The surge in commodity inflation,
leading to tightening of global monetary policies have stalled the growth in the major
economies of US and Europe, while the recovery in China has been far more tepid than
anticipated, owing to prolonged lockdowns. As a result, the global economic growth is
expected to drop to around 2.1% in 2023 and marginally improve to 2.7% in 2024 as per
World
Bank estimates. The uncertain situation in the major economies has also
aggravated the headwinds faced by emerging markets and developing economies with rising
debt, elevated inflation rates and multiple other crises. The growth in these economies is
expected to be in the range of 4% in 2023. Further deepening of financial woes raises the
concern of some of even the large global economies heading towards recession.
Manufacturing Sector in India
According to the Index of Industrial Production (lIP) data,
India's industrial output grew by 5.1% in FY 22-23 (financial year ending March
2023), albeit much lower than 11.4% in the previous fiscal which was over a weak base in
FY 21 due to COVID. Growth in industrial production and strong output from manufacturing,
mining and power generation were the key drivers. Continuing the positive trend into the
April- June quarter, IIP went up 5.2% Y-o-Y in May from 4.2% in April and is expected to
moderate to ~3-4% in June.
The capex spends by companies including those from capital-intensive
sectors was on a rise during the year where the total GFAs (Gross Fixed Assets) grew by
16%, reflectingIndia Inc.'s confidence in a stable domestic macro environment, and
healthy balance sheets. In the long term, the IIP is projected to trend around 4.9% in
2024 and 5% in 2025.
India stood out in comparison to the muted growth witnessed by other
major countries, and concluded the fiscalas one of the fastest growing economies in the
world with a GDP of 7.2% during FY 23 (Year ended 31.03.23.). This growth was underpinned
by a surge in private consumption alongside the Government's huge capex push. The GDP
in Q1 FY 24 (April June) is estimated at 7.9%, the bright spots being manufacturing and
construction, with sustained buoyancy in services. This outlook is likely to sustain
through
FY 24 leading to a growth projection between 6-6.5%. The continued
robust service exports and narrowing trade deficit is expected to augur well in helping
the Central government achieve its fiscal deficit target of 5.9% of GDP in FY 24. After
witnessing an elevated inflation in the first half, there was a steep decline and the year
ended at 4.8%, well below the threshold of RBI and forecasted to moderate at 5.1% in the
subsequent year. Overall, India's ability to absorb global shocks has set it on a
trajectory for accelerated growth, though downside risks continue to prevail from external
slowdown.
Performance of the Indian Auto Sector
After two years of slump brought on by COVID, followed by the global
chip shortage issue, the automobile industry bounced back in FY 23 to become a $108Bn (INR
8.7 lakh crore) industry. While the two-wheeler segment grew in volume, the Passenger
Vehicle (PV) segment saw a value growth with shifting preference of consumers towards
higher end vehicle models. The former grew 16.9% in the fiscal, whereas the latter saw a
growth of 26.9% as released by the Society of Indian Automobile Manufacturers (SIAM).
Commercial vehicles topped the chart with 34.3% higher sales over last
fiscal. This overall spike in sales has propelled India to rank first in production of
two-wheelers and third in PVs. While e-mobility increased its share in the pie, the
segment is still at a nascent stage, two-wheelers being the highest contributors. With the
growth indicators expected to remain steady, the domestic automobile industry's sales
volume is expected to grow by 7%-9% during FY 24, mainly driven by commercial and
passenger vehicles. The tractor industry on the other hand, benefitted from conducive
agricultural conditions and farmer prices. Production volumes peaked to more than 1
million units for the first time, while domestic volumes grew 12% according to Tractor
& Mechanization Association (TMA). This growth is expected to moderate in FY 24, owing
to a high base and prediction of below "normal" monsoons.
The auto components industry registered double-digit growth in FY
23 with domestic volumes recuperating to pre pandemic levels and moderation of global
supply chain constraints. The industry revenue is expected to grow 5-8 per cent in FY 24,
touching a revenue figure of over Rs 2.5 lakh crore on increased domestic demand,
premiumization of vehicles, focus on localization and improved export and regulatory
norms.
Financial Performance
Your Company's revenues recorded a total of Rs 10,771 Million in
FY 23 showing a growth of 8.7% over the prior year, and the Profit before Tax (PBT) was Rs
1176 Million for FY 23, which was 22.9% below the prior year. in merchandise
There was a negative impact on the PBT due to macroeconomic factors and
geopolitical tensions leading to a slowdown in various parts of the world including China
which led to a reduction in our exports from both the Machining Solutions and Hard Metals
Group.
The drop in profitable exports, the underutilsation of capacity during
the year and the expenses connected to the establishment of the new master inserts plant
including the movement of all the machines to the new plant affected our profit before tax
as you can see from the chart above and from the financial statements forming part of this
Annual Report.
Changes to the Constitution of the Board
During FY 23, your Company witnessed one change to the Board
constitution with Mr. Parameshwar Reddy, Non-Executive Director & nominee of
Kennametal Inc., resigning from the directorship of the Company. Mr. Reddy's
resignation from the directorship was consequent to his resignation from the role of
Director-Finance, Asia Pacific, Kennametal Singapore Pte. Ltd. to pursue opportunities
outside of Kennametal. The Board has placed on record its appreciation of the valuable
services & contribution rendered by Mr. Reddy during his tenure as a Director on our
Board. Subsequent to the end of FY 23, the Board appointed Mrs. Kelly Golden Lynch as an
Additional Director on 11th August 2023, based on the recommendation of the
Nomination and Remuneration Committee. Her appointment is also being proposed for approval
by the shareholders in the ensuing Annual General Meeting.
The Board of your Company therefore remains well-constituted with
optimal representation of experts from various realms that adheres to all governance
norms.
Corporate Governance & Environment, Social and Governance (ESG)
Corporate governance is an essential part of decision making and
conducting business at Kennametal. While ensuring governance, your Company is always
committed to safety, ethics and the wellbeing of all its stakeholders as part of its ESG
initiatives. During the year under review, your Company has for the first time published
the Business Responsibility and Sustainability Report that enlists various ESG initiatives
of your Company. I am proud to state that many of these ESG initiatives were started and
followed by your company well before they became any kind of a legal or mandatory
requirement as Kennametal highly values these initiatives and actions forming part of its
Environment, Health and Safety (EHS) & ESG policies.
CSR: Corporate Social Responsibility
During FY 23, your Company's CSR initiatives have been centred
around the three long standing focus areas of (i) Protecting our Planet (ii) Tech
Education as part of Promotion of Education and
(iii) Kennametal in the Community. The Company has spent Rs 19.22
Million towards projects aligned with these three pillars as part of
its CSR initiatives in FY 23 and met the statutory requirements for CSR expenditure during
the financial year. The Managing Director's report will provide you with more details
on the well planned actions taken under your Company's CSR programme.
Summary and The Way Ahead
Amid a strong domestic demand and the Government's stimulus
towards investments in India, your company delivered a sales growth of 8.7% over the prior
year, registering growth across both Hard Metals and Machine Tools segments. The
Kennametal India team continued to partner with customers and endeavoured to deliver on
our vision to "Transform how everyday life is built". The company registered a
broad-based growth, leveraging opportunities across transportation, aerospace, energy,
engineering, and earthworks.
We continued to deliver on our three-pronged CSR strategy of protecting
our planet, supporting technical education and increasing our involvement in the
community. We intensified our focus on people initiatives by strengthening our safety
practices, driving employee engagement, supporting Diversity & Inclusion initiatives
and building a robust talent pipeline.
As we move into FY 24 which appears to have both opportunities and
challenges, I am confident that our ethical business policies, our dedicated management
team and our robust Balance Sheet, will strongly support your company's profitable
growth. On behalf of the Board of Directors, I would like to sincerely thank all our
employees once again, for their dedication and focus on the Company's goals and
priorities. I would be failing in my duty if I did not acknowledge the significant
customers, distribution partners, vendors and bankers in our growth and success. I would
also like to take this opportunity to thank all the regulatory authorities and our loyal
shareholders for their continued support and encouragement.
Before I conclude, I would also like to sincerely thank my fellow
Board Members for their encouragement and guidance to the management
led by Mr. Vijaykrishnan Venkatesan, our Managing
Director, who along with the Senior Leadership Team has ensured that
your company continues its focus on both business performance and business ethics.
I wish the Kennametal team continued success in all its endeavours in
the years to come. Thank you,
B. Anjani Kumar Chairman
  Â
Kennametal India Ltd
Directors Reports
Your Directors are pleased to present the 58 Annual Report along with
the Audited Financial Statements for the financial year ended June 30, 2023:
FINANCIAL RESULTS
( Rs In Million)
| Particulars |
FY23 |
FY22 |
| Revenue from operations |
10771 |
9907 |
| Pro t before tax |
1176 |
1526 |
| Less: tax expense |
299 |
385 |
| Current tax |
286 |
405 |
| Tax adjustment relating to earlier years |
11 |
(9) |
| Deferred tax (credit)/charge |
2 |
(11) |
| Pro t after tax |
877 |
1141 |
| Other comprehensive income/(loss) for the
year, net of tax |
(15) |
(12) |
| Total comprehensive income for the year |
862 |
1129 |
| Add: balance brought forward from previous
year |
6243 |
5637 |
| Total available for appropriation |
7105 |
6766 |
| Interim dividend |
(440) |
(527) |
| Share based compensation adjustment |
(2) |
4 |
| Balance transferred to balance sheet |
6663 |
6243 |
*Previous period gures have been regrouped and/or reclassi ed wherever
necessary to con rm with the current period presentation in compliance with
Ind AS requirement.
STATE OF COMPANY'S AFFAIRS
Operating results
Pro t Before Tax (PBT) for the year was Rs 1176 Million, down 22.9%
over previous year. The Company's profit was down in comparison with the previous year on
account of one-time expenses incurred towards shifting of manufacturing facilities and
movement of machines to a large new modern plant within the factory premises, slower
recovery in China which affected the Company's exports and under absorption of costs
due to lower manufacturing activity to correct the inventory .
Return on capital and cash ows
Return on Capital Employed (ROCE) was 17% in FY23 comparing to 24% in
FY22. Return (PAT) on net worth was 13% in FY23 comparing to 18% in FY22. Net operational
cash flow generated during the year increased from Rs 491 million in FY22 to Rs 1158
Million in FY23. The increase in the operating cash flows is mainly due to working capital
improvement.
Dividend and reserves
An Interim Dividend of Rs 20/- per Equity Share of Rs 10/- (Rupees Ten
only) each (200% on the Paid-up Share Capital of the Company) was declared by the Board
for the financial year ended June 30, 2023 and May 25, 2023 was xed as Record Date for the
said purpose. The said Interim Dividend was paid on June 7, 2023. The Board of Directors
has decided to treat the Interim Dividend as Final Dividend for the financial year ended
June 30, 2023.
The Company has not transferred any amounts to general reserves for the
financial year ended June 30,2023.
Dividend distribution policy
Pursuant to Regulation 43A of the Securities and Exchange Board of
India (Listing Obligations and Disclosure Requirements) Regulations, 2015 [hereinafter
referred as ‘SEBI (LODR) Regulations, 2015'], the Board of Directors of the
Company had formulated a Dividend Distribution Policy. All the policies of the Company
including Dividend Distribution Policy is available on the website of the Company at
https://www.kennametal.com/in/en/about-us/kil- nancials/policies.html
CHANGES IN SHARE CAPITAL
There were no changes in the Share Capital of the Company during the
financial year.
STATEMENT OF DEVIATION(S) OR VARIATION(S) IN SHARE CAPITAL
During the year under review, there was no instance to report Statement
of Deviation(s) or Variation(s) in share capital as per Regulation 32 of the SEBI (LODR)
Regulations, 2015.
CAPITAL STRUCTURE OF THE COMPANY
The Authorized Share Capital of the Company is Rs 219,782,400 divided
into 21,978,240 (Twenty-One Million, Nine Hundred and Seventy-Eight Thousand, Two Hundred
and Forty only) Equity Shares of Rs 10/- each. The Issued, Subscribed and Paid-up Share
Capital of the Company as on date is Rs 219,782,400 divided into 21,978,240 Equity Shares
of Rs 10/- each.
DISCLOSURE REGARDING ISSUE OF EQUITY SHARES WITH
DIFFERENTIAL VOTING RIGHTS
During the financial year under review, the Company has not issued
Equity shares with Differential Voting Rights.
DISCLOSURE REGARDING ISSUE OF EMPLOYEE STOCK OPTIONS
During the financial year under review, the Company has not issued
Shares under Employee Stock Options.
DISCLOSURE REGARDING ISSUE OF SWEAT EQUITY SHARES
During the financial year under review, the Company has not issued
Sweat
Equity Shares.
MATERIAL CHANGES AND COMMITMENTS
There has been no material changes and commitments, affecting the
financial performance of the Company which occurred between the end of the financial year
of the Company to which the financial statements relate and the date of this Report.
MANAGEMENT DISCUSSION AND ANALYSIS
The Management Discussion and Analysis (‘MD&A') Report is
annexed to this report as "Annexure I" as required under Regulation 34 of SEBI
(LODR) Regulations, 2015.
DIRECTORS AND KEY MANAGERIAL PERSONNEL
Directors Retiring by Rotation
In accordance with the provisions of Section 152 of the Companies Act,
2013 and Articles of Association of the Company, Mr. Franklin Gerardo Cardenas Castro
(DIN: 09050884), is due to retire by rotation at the forthcoming Annual General Meeting
(‘AGM') and, being eligible, offers himself for re-appointment. The Board
recommends his re-appointment at the forthcoming AGM.
A brief pro le of Mr. Franklin Gerardo Cardenas Castro as required
under
Regulation 36(3) of SEBI (LODR) Regulations, 2015 is furnished along
with the Notice convening 58 AGM.Annual Declaration from Independent Directors
The Company has received declarations from all the Independent
Directors of your Company confirming that they meet the criteria of Independence as
mentioned under sub-section (6) of Section 149 of the Companies Act, 2013 and as per the
SEBI (LODR) Regulations, 2015 and criteria of independence from the Management. The
Independent Directors possess the requisite integrity, expertise and experience (including
pro ciency) necessary for acting as Independent Directors of the Company.
On October 22, 2019, the Ministry of Corporate Affairs (‘MCA') had
released the Companies (Accounts) Amendment Rules, 2019, the Companies (Appointment and
Qualification of Directors) Fifth Amendment Rules, 2019 and the Companies (Creation and
Maintenance of databank of Independent Directors) Rules, 2019. These rules have come into
force on December 1, 2019, and your Company has complied with these requirements.
Directors' appointment and remuneration
The policy on Directors' appointment and remuneration including
criteria for determining quali cations, positive attributes, Independence of Director and
remuneration for Key Managerial Personnel and other employees' forms part of Corporate
Governance Report of this Annual Report. The web-link for the said policy is
https://www.kennametal.com/in/en/about-us/kil- nancials/policies.html
Directors' interest
No Director was materially interested in any contracts or arrangements
existing during or at the end of the year in relation to the business of the Company.
No Director holds any shares in the Company as on June 30, 2023, except
Mr. B. Anjani Kumar, Chairman & Non-Executive Independent Director, who holds 10
Equity Shares of Rs 10/- each in the Company.
Appointment / Cessation / Resignation of Directors
As detailed in the Corporate Governance report, it is worthwhile here
to reiterate some of the changes to the constitution of the Board.Mr. Devi Parameswar
Reddy (DIN: 03450016), who acted as Director of the Company for over 4 years resigned from
the Office of Director of the Company effective closing of business hours of February 10,
2023. The Board of Directors places its sincere appreciation for the commendable
contribution to the Board by Mr. Devi Parameswar Reddy during his tenure as the Director
of the Company.
There were no other changes to the composition to the Board of
Directors of the Company during the financial year ending June 30, 2023. However, Ms.
Kelly Golden Lynch (DIN: 10270042) was appointed as an Additional Director
(Non-Independent, Non-Executive) of the Company effective
August 11, 2023. Further, her appointment as Director is being proposed
to the Shareholders of the Company at the ensuing 58 Annual General Meeting of the Company
to be held on November 10, 2023.
INVESTOR EDUCATION AND PROTECTION FUND (IEPF)
Pursuant to the applicable provisions of the Companies Act, 2013, read
with the IEPF Authority Accounting, Audit, Transfer and Refund) Rules, 2016 ("the
IEPF Rules"), all unpaid or unclaimed dividends are required to be transferred by the
Company to the IEPF, established by the Government of India, after the completion of seven
years from the date of transfer to unpaid dividend account. Further, according to the IEPF
Rules, the shares on which dividend has not been paid or claimed by the shareholders for
seven consecutive years or more shall also be transferred to the demat account of the IEPF
Authority. During the year, the Company has transferred the unclaimed and unpaid dividends
to the IEPF. Further, shares on which dividends were unclaimed for seven consecutive years
were transferred as per the requirements of the IEPF rules, however in one case the shares
could not be transferred to IEPF by the depositories, despite the Company's best
endeavour, due to shareholder's demat account was suspended. Details on the shares
transferred to IEPFs are available on our website at
https://www.kennametal.com/in/en/about-us/kil- nancials/investor-corner.html
DIRECTORS RESPONSIBILITY STATEMENT
Based on the framework of internal financial controls and compliance
systems established and maintained by the Company, work performed by the internal,
statutory, cost and secretarial auditors and external consultant(s) including audit of
internal financial controls over financial reporting by the Statutory Auditors and the
reviews performed by Management and the relevant Board Committees, including the Audit
Committee and Risk Management Committee, the Board is of the opinion that the Company's
internal financial controls were adequate and effective during FY23.
Accordingly, pursuant to the provisions of Section 134(3)(c) and
Section 134(5) of the Companies Act, 2013, the Board of Directors, to the best of its
knowledge and ability, report that:
The applicable accounting standards have been followed in the
preparation of the financial statements, along with proper explanations relating to
material departures, if any; selected such accounting policies and applied them
consistently and made judgments and estimates that are reasonable and prudent so as to
give a true and fair view of the state of affairs of the Company as of June 30, 2023 and
profit of the Company for the year ended on that date; proper and sufficient care has been
taken for the maintenance of adequate accounting records in accordance with the provisions
of the Act for safeguarding the assets of the Company and for preventing and detecting
fraud and other irregularities; prepared the annual accounts on a going concern basis;
laid down internal financial controls to be followed by the Company and that such internal
financial controls are adequate and were operating effectively; and devised proper systems
to ensure compliance with the provisions of all applicable laws and that such systems were
adequate and operating effectively.
DEPOSITS
During the financial year, your Company has not invited / accepted any
Public Deposits pursuant to the provisions of Chapter V of the Companies Act, 2013.
SUBSIDIARIES, JOINT VENTURES AND ASSOCIATE COMPANIES
Scheme of Amalgamation
Your Company had a Wholly Owned Subsidiary viz., WIDIA India Tooling
Private Limited which was merged with the Company vide the Order of the Hon'ble National
Company Law Tribunal (“NCLT”), Bengaluru bench dated October 17, 2022, which
have been duly signed by Deputy / Assistant Registrar NCLT, Bengaluru bench on November
11, 2022.
Your Company does not have any subsidiary as on year ended June 30,
2023 pursuant to the approval of the aforementioned Scheme. Hence, the requirement of
enclosing financial statement of subsidiary in Form AOC-1 to the Board's Report and
preparation of Consolidated financial statements does not arise for the year ended June
30, 2023. The Company has taken due care of relevant accounting treatment prescribed under
the said scheme and the post-merger compliances have been duly adhered.
As at June 30, 2023 there are no joint venture/s and/ or Associate/s of
your Company.
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Financial Statement is not applicable for the financial
year ended June 30, 2023 considering the merger of its subsidiary viz., WIDIA India
Tooling Private Limited with the Company as mentioned above.
PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS
The details of Loans and Investments covered under the provisions of
Section 186 of the Companies Act, 2013 are given in the Notes to the Financial Statements
forming part of Annual Report. The Company has not provided any loans and guarantees
during the Financial Year.
SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE
REGULATORS OR COURTS OR TRIBUNALS
During the financial year under review, there were no significant and
material orders passed by the Regulators or Courts or Tribunals impacting the going
concern status of the Company and its future operations.
CHANGE IN THE NATURE OF BUSINESS
There were no changes in the nature of business of the Company during
the financial year ended on June 30, 2023.
EVALUATION OF THE BOARD'S PERFORMANCE
Pursuant to the provisions of the Companies Act, 2013 and SEBI (LODR)
Regulations, 2015, the Board had adopted a formal mechanism for evaluating its performance
and that of its Committees and Directors, including the Chairman of the Board. During the
financial year, the evaluation exercise was carried out through a structured evaluation
process covering various aspects of the functioning of the Board and Committees such as
their composition, experience & competencies, performance of specific duties &
obligations, governance issues etc. A separate exercise was carried out to evaluate the
performance of each Director including the Board's Chairman who were evaluated on
parameters such as contribution at the meetings, independent judgment, attendance and
other relevant aspects. The Board was satisfied with the evaluation results, which
reflected the overall engagement of the Board, Committees and the Directors of the
Company.
Your Company has laid out the criteria for evaluating the independence
of Independent Directors and had in place a robust evaluation of performance of Directors,
even before the promulgation of SEBI (LODR) (Amendment) Regulations, 2018.
FAMILIARIZATION PROGRAMME
The Company has a structured familiarization program for Independent
Directors of the Company which is also extended to other Non-Executive Directors to ensure
that Directors are familiarized with the operations of the Company; the markets where the
Company operates; the product lines; strategy of the Company and its implementation
status; Enterprise Risk Management and status of mitigation plans; Governance structure;
Board protocols including the manner of conducting Board meetings; the roles,
responsibilities and duties expected of a Director in India as per the extant Companies
Act, 2013 and SEBI (LODR) Regulations, 2015 amongst others.
The Board of Directors has complete access to the information within
the Company. Presentations are regularly made to the Board of Directors and to the members
of the Committees of the Board on various matters, where Directors get an opportunity to
interact with Senior Management and understand status of strategy implementation, business
model, operations, markets, organization structure, product offerings, nance, risk
management framework, quarterly and annual results, human resources, technology, quality
and such other areas as may arise from time to time.
A document on the familiarization programme is available on our website
at https://www.kennametal.com/in/en/about-us/kil- nancials/corporate-governance.html
The Company also issues appointment letters to the Independent
Directors which, inter-alia, incorporate their roles, duties and responsibilities.
The format of the said letter of appointment is available on our website at
https://www.kennametal.com/in/en/about-us/kil- nancials/policies.html
CORPORATE GOVERNANCE
Pursuant to Regulation 34(3) read with Schedule V(C) of SEBI (LODR)
Regulations, 2015, a report on Corporate Governance along with a certificate from Mr.
Vijayakrishna K T, Practising Company Secretary regarding compliance of conditions of
Corporate Governance is annexed as "Annexure ll A" and "Annexure ll B"
respectively and a Certificate as required under Schedule V Part C(10) (i) of SEBI (LODR)
Regulations, 2015 from Mr. Vijayakrishna KT, Practising Company Secretary is annexed as
"Annexure lII" which forms part of this report. Further, in compliance with the
SEBI (LODR) Regulations, 2015, your Board has adhered to the Corporate Governance
requirements / Code.
As required by SEBI (LODR) (Amendment) Regulations, 2018, ‘Annual
Secretarial Compliance Report' issued by Mr. Vijayakrishna KT, Practising Company
Secretary for the financial year ended June 30, 2023 is annexed as "Annexure IV"
which forms part of this report.
COMPLIANCE WITH THE CODE OF CONDUCT
A declaration signed by the Managing Director af rming compliance with
the Company's Code of Conduct by your Directors and Senior Management of your Company, for
the financial year under review, as required under SEBI (LODR) Regulations, 2015 is
annexed as "Annexure V" and forms part of this report.
The Kennametal Code of Business Ethics & Conduct is a major
component of the Kennametal Value Business System (‘KVBS'). The Code addresses
the importance of fair dealing and compliance in all aspects of your Company's business
and focuses on the concept of doing the right thing every day.
Further details on the Code of Conduct and enforcement of the code are
elucidated in the Corporate Governance report. Your Company insists on its employees to
embrace the Code of Business Ethics & Conduct to ensure maintenance of strong ethical
culture. The Code of Conduct is available on the website of the Company at
https://www.kennametal.com/in/en/about-us/kil- nancials/policies.html
>CEO/MD AND CFO CERTIFICATE
A Certificate from the Managing Director and the Chief Financial Of cer
dated August 07, 2023, on the Financial Statements of the Company for the financial year
ended June 30, 2023 is annexed as "Annexure- VI" and forms part of this report.
WHISTLE-BLOWER POLICY / VIGIL MECHANISM
Even before the promulgation of Section 177 of the Companies Act, 2013,
your Company had a Whistle Blower Policy / mechanism. Pursuant to Section 177 of the
Companies Act, 2013 and SEBI (LODR) Regulations, 2015, the Board of Directors have
approved and adopted robust Vigil Mechanism / Whistle Blower Policy. The Whistle Blower
Policy provides the following avenues for stakeholders including employees to raise
complaints freely:
Audit Committee of Kennametal India Limited;
Compliance Of cer - Kennametal India Limited;
Ethics Alert Line (toll-free and anonymous): 000-117+1-877-781-7319
K-Corp Ethics Mailbox: k-corp.ethics@kennametal.com; and
Office of Ethics and Compliance Fax: + 1 724-539-3839 Telephone: + 1
724-539-4031, Mailing Address: Office of Ethics and Compliance, 1600 Technology Way,
Latrobe, Pennsylvania (USA) 15650.
The Complainants duly receive feedback on action taken and this ensures
that stakeholders including employees are protected against victimization for any
"Whistle Blower" intimation made by them in good faith.
Your Company af rms that no personnel have been denied access to the
Audit Committee. Whistle Blower Policy for vigil mechanism is available on website of the
Company at https://www.kennametal.com/in/en/about-us/kil- nancials/policies.html
The Kennametal Ethics Helpline
Anyone can make a complaint about the violation of the Code of Conduct
of the Company. Reports made to the helpline can be done via the phone or the web on a con
dential and anonymous basis, where allowed by local law. The helpline is administered by
an independent third-party and is available 24 hours a day, 7 days a week.
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION,
FOREIGN EXCHANGE EARNINGS AND OUTGO ETC.
A report in respect of conservation of energy, technology absorption,
foreign exchange earnings and outgo, as required under Section 134(3)(m) of the Companies
Act, 2013 read with the Rule 8(3) of the Companies (Accounts) Rules, 2014, is annexed as
"Annexure VII" to this report.
STATUTORY AUDITORS & THEIR REPORT
Messrs. Price Waterhouse & Co. Chartered Accountants LLP, Chartered
Accountants (FRN: 304026E / E-300009) were appointed as Statutory
Auditors of the Company at the 57 AGM held on November 11, 2022, for a period of 5 (Five)
years to hold the office until the conclusion of 62 AGM.
The Independent Auditors' Reports to the Members on the Financial
Statements of the Company for the financial year ended June 30, 2023 does not contain any
quali cation, reservation or adverse remarks. The notes on financial statements referred
to in the Independent Auditors' Report are self-explanatory and do not call for any
further comments.
REPORTING OF FRAUDS
There was no instance of fraud during the financial year under review,
which required the Statutory Auditors to report to the Audit Committee and / or the Board,
as required under Section 143(12) of the Companies Act, 2013 and Rules framed thereunder.
SECRETARIAL AUDITOR
Mr. Vijayakrishna K.T, Practising Company Secretary (FCS: 1788 &
COP: 980) carried out Secretarial Audit under the provisions of Section 204 of the
Companies Act, 2013 for the financial year 2022-23 and submitted his report, which is
annexed to this report as "Annexure VIII".
The Secretarial Audit Report does not contain any quali cation,
reservation or adverse remark.
COST AUDITORS
Pursuant to Section 148 of the Companies Act, 2013 read with the
Companies (Cost Records and Audit) Rules, 2014, the cost audit records maintained by the
Company in respect of the products covered under the said rules are required to be audited
by a Cost Accountant. Accordingly, the Board of Directors of the Company upon
recommendation of the Audit Committee has re-appointed Messrs. K. S. Kamalakara & Co.,
Cost Accountants (Firm Registration No: 0000296), as the Cost Auditors of the Company for
the financial year 2023-24. As required under Section 148 of the Companies Act,2013, the
Shareholders' approval for the remuneration payable to Messrs K. S. Kamalakara &
Co., Cost Auditors is being sought at the ensuing 58 AGM.
The Cost Audit Report for FY23 does not contain any quali cation,
reservation or adverse remarks.
INTERNAL FINANCIAL CONTROL
Details of internal financial control and its adequacy are included in
the Management Discussion and Analysis Report which is annexed to this Report as
"Annexure - I".
INTERNAL AUDITORS OF THE COMPANY
Pursuant to the provisions of Section 138 of the Companies Act, 2013,
the Board of Directors of the Company upon recommendation of the Audit Committee had
appointed Messrs. Ernst & Young LLP, as the Internal Auditors of the Company for the
financial year 2022-23.
CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES
Pursuant to the provisions of Section 188 of the Companies Act, 2013
and Regulation 23 of SEBI (LODR) Regulations, 2015, the Related Party Transactions
(‘RPTs') that were entered into during the financial year 2022-23 were at arm's
length basis and were in the ordinary course of business. Further, there were no material
related party transactions during the financial year under review with the Directors or
Key Managerial Personnel of the Company. All related party transactions were placed before
the Audit Committee and the Board for approval as applicable under Section 188 of the
Companies Act, 2013 and Regulation 23 of SEBI (LODR) Regulations, 2015.
The Policy on RPTs as approved by the Board is uploaded on the
Company's website at https://www.kennametal.com/in/en/about-us/kil- nancials/policies.html
The Particulars of RPTs in Form AOC - 2 is annexed to the Report as "Annexure
IX".
PARTICULARS OF DISCLOSURES AS REQUIRED UNDER SECTION
197 OF THE COMPANIES ACT, 2013
Pursuant to Section 197(12) of the Companies Act, 2013 read with the
Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014, the ratio
of the remuneration of each Director to the median employee's remuneration for the
financial year 2022-23 and such other details as prescribed are set out in the
"Annexure X" to this report.
A statement showing details of employees of the Company employed
throughout the financial year and employees employed for part of the year who were in
receipt of remuneration of Rs 10.2/- million or more per annum or Rs 0.85/- million or
more per month respectively is annexed herewith as "Annexure XI" to this report.
DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT
WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL}) ACT, 2013
Your Company has an Internal Complaints Committee (‘ICC') as
required under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and
Redressal) Act, 2013. Your Company had received 1 (one) complaint under the Sexual
Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, during
the year under review, which was duly redressed to the satisfaction of the complainant.
REVISION OF FINANCIAL STATEMENT OR THE REPORT
There was no revision of Financial Statements of the Company in the
preceding three financial years.
INSOLVENCY AND BANKRUPTCY CODE, 2016
There was no application made or any proceeding pending under the
Insolvency and Bankruptcy Code, 2016 (31 of 2016) during the financial year.
DETAILS OF DIFFERENCE BETWEEN AMOUNT OF THE VALUATION DONE AT THE TIME
OF ONE TIME SETTLEMENT AND THE VALUATION DONE WHILE TAKING LOAN FROM THE BANKS OR
FINANCIAL INSTITUTIONS ALONG WITH THE REASONS THEREOF
During the FY 2022-23, there were no Insolvency Proceedings initiated
against the Company and hence there were no instances of one-time settlement during the
Financial Year.
INAUGURATION OF NEW METAL CUTTING INSERTS
MANUFACTURING FACILITY
During the year under review, your Company had inaugurated its new
metal cutting inserts manufacturing facility in the existing factory premises. This
state-of-the-art facility supports your company to meet growing demand for Kennametal
brand and WIDIA brand inserts from customers.
CREDIT RATING OF SECURITIES
During the year under review, India Ratings & Research (the
"Credit Rating Agency”), vide their report dated July 18, 2022, have assigned
your Company, a Long-Term Issuer Rating of "IND AA-" and the outlook is Stable.
REMUNERATION RECEIVED BY MANAGING DIRECTOR FROM
HOLDING OR SUBSIDIARY COMPANY
During the year under review, no Commission or Remuneration was paid to
the Managing Director from the Holding / Subsidiary Company of your Company.
INSURANCE
Your Company has sufficient insurance coverage not only on all its
assets but also from most of the anticipated risks. All insurance policies are reviewed
and renewed from time to time.
RESEARCH & DEVELOPMENT (R&D)
The Research, Development and Engineering (‘RD&E'), works
on new Product and Process Developments with specific focus on materials, coatings and
machining technology. The RD&E, Bangalore works on the market requirements in terms of
new products, custom solutions, cost saving projects, process developments, product
benchmarking and basic research. It is also recognized by the Ministry of Science &
Technology - Department of Scienti c and Industrial Research - Government of India.
ENVIRONMENT, HEALTH AND SAFETY (EHS)
A cleaner, healthier and safer environment is a value we demand of
ourselves and others and is integrated into everything we do. Environmental, Health and
Safety (EHS) are fundamental to your Company's business and its ability to deliver the
promise of safety to all the stakeholders, including its employees, customers,
shareholders and the public. EHS vision is communicated to all, almost every day.
Employees are encouraged and empowered to demonstrate their commitment to Kennametal's EHS
protocols.
Brief on some of the initiatives undertaken by the Company during the
financial year under review are as follows:
Protecting Our Planet - Providing sustainable solutions by reducing the
total environmental impact of our products and operations. During the year under review,
the Company has got Hazardous Waste Authorization by the Karnataka State Pollution Control
Board (KSPCB) which is valid for a period of 5 years. Your Company has been working
towards protecting our planet by continuously improving the management of energy and
natural resources, promoting recycling & recovery of materials and preventing
pollution. 73% of the power consumption at your Company's premises is from renewable
source of energy. Your Company is cognizant of preserving the ground water table and in
this regard has been closely working with organized NGOs. 'One Billion Drops' - 60
Percolation wells in identified parks under Dasarahalli Zone of BBMP (in the vicinity of
KIL) are being implemented to improve the ground water table which helps to aid the growth
of trees and plants in these parks, this will also help in avoiding water logging or
wastage of water due to these rain-water harvesting pits.
Lake Restoration project at Devanahalli - Restoration of quality of
water in the lake, free from garbage, ef uents & other pollutants:
Revival of eco-system in and around the lake by creating microclimate
for aquatic ora & fauna;
Sustained ground water table, water conservation both in quantity &
quality;
Flood mitigation and erosion control; improved vegetation & good
oxygen.
Urban Afforestation Project - 10,000 saplings were planted to improve
Karnataka's natural green cover (Miyawaki type plantation in Government approved
land/area at S. Bingipura). The plantation will be maintained for 2 years. This urban
afforestation project will ensure a diverse and rmly rooted forest cover in the area and
will positively impact the ecosystem.
Your Company continued to monitor the hazardous and non-hazardous
waste, according to waste stream and disposal route, with performance assessed on the
basis of waste intensity. These initiative will add value to the society and cater to the
cause of sustainable development.
GREEN INITIATIVES
In addition to the above and as part of its efforts to reduce
consumption of paper and thereby protect the environment, your Company has ensured that
electronic copies of the Annual Report and the notice of the 58 AGM are being sent to all
such Members whose e-mail addresses are registered with the Company / its Registrar and
Transfer Agent.
To the other Members, physical copies of the Annual Report and Notice
of the 58 AGM are being sent through permitted modes of dispatch. However, Members who
have received the said documents in electronic mode but desire to seek physical copies of
the same, can send their request to the Company Secretary of the Company at
in.investorrelation@kennametal.com
Safety Performance:
100% Safety - Pursuing a goal of zero injuries, illnesses, and
incidents by living the belief that all are preventable. Your Company is pursuing the goal
of zero incidents through senior leader ownership of safety, preventative actions and
processes, and by establishing leadership roles for employees in safety.
As part of continual initiatives in raising the bar of safety
performance, your Company has during FY23 brought about considerable improvements in the
safety performance:
1SO 14001 & 180 45001: Your Company was re-certi ed for the ISO
14001 the Environmental Management System and ISO 45001 the Occupational Health and Safety
Management system by TUV, a third-party agency without any Non-conformance.
EHS regulatory compliance: The Company strives to meet all applicable
EHS regulatory compliance by regular review mechanism and regular updates are provided to
the Management.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
Pursuant to the provisions of Section 134(3) (o) of the Companies
Act,2013 and rules made thereunder, the Corporate Social Responsibility Policy of the
Company and initiatives undertaken by the Company on CSR activities during the financial
year ended June 30, 2023, are set out in "Annexure XII" to this report. The CSR
Policy is available on Company's website at https://www.kennametal.com/in/en/about-us/kil-
nancials/policies.html
Your Company has spent Rs 19.22 million on the CSR for the year 2022-23
as against the total budget of Rs 19.21 million, thereby spending an excess of Rs 2,628/-.
PERSONNEL / INDUSTRIAL RELATIONS
During the financial year under review, your Company maintained cordial
industrial relations at all levels. Your Directors record their appreciation for the
contribution made by the employees.
RISK MANAGEMENT
Enterprise Risk Management (ERM) at the Company is driven by the Risk
Management Committee and Board of Directors through their routine oversight
responsibilities. The Management team plays a primary role in identi cation, monitoring
and minimizing risks as also to identify business opportunities and threats. As a process,
any risk associated with the business is identified and prioritized based on severity,
occurrence and effectiveness of detection. The Risks are being reviewed by the Management
team periodically and reported to the Risk Management Committee at regular intervals for
their review. The Department Leaders have the responsibility to monitor and implement the
ERM framework approved by the Risk Management Committee.
The Company has formulated a Risk Management Policy and Risk Committee
Charter and a mechanism to inform the Risk Management Committee of the Board about the
risk assessment activity performed from time to time. The detailed Risk Management
mechanism is provided in the
Management Discussion and Analysis (MD&A) Report.
The Risk Management Committee is constituted with the Board of
Directors of the Company as its members. The Chairperson of the Committee is Ms. Bhavna
Bindra. As an established practice, the Board of Directors are being updated on risks
identi cation and steps taken to mitigate the same. Risk Management Policy and Charter are
uploaded on the Company's website at https://www.kennametal.com/in/en/about-us/kil-
nancials/policies.html
The Company has also been employing the services of Ernst and Young LLP
(‘EY'), India as its Internal Auditors and EY India regularly conducts internal
audits of various parts of the company's operations, as per an Annual Audit Plan which is
agreed every year with the Audit Committee of the Board.
ANNUAL RETURN
Pursuant to Section 92(3) of the Companies Act, 2013 read with
applicable rules, a copy of the Annual Return for the FY 2022-23 is uploaded on the
website of the Company and the same is available at
https://www.kennametal.com/in/en/about-us/kil- nancials/corporate-governance.html
BUSINESS RESPONSIBILITY & SUSTAINABILITY REPORT
Pursuant to Regulation 34 of the SEBI (LODR) Regulations, 2015 your
Company is required to include Business Responsibility & Sustainability Report (BRSR)
in the Annual Report describing the initiatives taken by the Company from Environmental,
Social and Governance perspective. The BRSR is enclosed as "Annexure XIII" to
the Board's Report.
POLICIES / CODES
The Company has adopted various policies / codes which are reviewed by
the Board and its Committees at regular intervals and are amended as and when required.
These Policies / Codes are available on the website of the Company at
https://www.kennametal.com/in/en/about-us/kil- nancials/policies.html
NUMBER OF BOARD MEETINGS
The Board of Directors met Five (5) times during the financial year
2022- 23. The details of the Board meetings and the attendance of the Directors are
provided in the Corporate Governance Report.
The Agenda of the Meeting is circulated to the Directors in advance.
The Minutes of the Meetings of the Board of Directors are circulated amongst the Members
of the Board for their perusal and approval.
COMMITTEES OF THE BOARD OF DIRECTORS
Details of memberships and attendance of various Committee Meetings of
the Company including a separate Meeting of the Independent Directors are given in the
Corporate Governance Report.
COMPLIANCE WITH THE APPLICABLE SECRETARIAL STANDARDS
The Company has complied with the applicable Secretarial Standards
issued by the Institute of Company Secretaries of India on the Board Meetings and General
Meetings.
ACKNOWLEDGEMENTS
Your Directors place on record their appreciation for the untiring
efforts and un inching commitment of the employees of your Company and the vendors who
were instrumental in maintaining manufacturing excellence, so as to ensure customer
delight. Your Directors also place on record their sincere appreciation for the continued
support and cooperation of the investor community, the Company's bankers, the
regulatory authorities and the Company's customers in FY 23.
For and on behalf of the Board of Directors of
Kennametal India Limited
| B. Anjani Kumar |
Vijaykrishnan Venkatesan |
| Chairman & Independent Director |
Managing Director |
| DIN: 00022417 |
DIN: 07901688 |
| Bengaluru |
|
| August 30, 2023 |
|
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