Kirloskar Oil Engines Ltd. Welcomes You To Analysts Meet: Vijay Varma, Senior Vice President Pune, INDIA July 27, 2007

Kirloskar Oil Engines Ltd.
Welcomes you to
Analysts Meet
Vijay Varma,
Senior Vice President
Pune, INDIA
July 27, 2007
Today’s 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 Kirloskar Oil Engines Ltd. 2

We will become a major Global Player in off–highway
engines and power generation businesses by
offering winning combinations of Quality, Cost and
Delivery through innovation and unmatched service.
We will be amongst the Top Five engine companies
of the world.
While pursuing the above, we will continue to
enhance the value of engine bearing and valves
business.
Target Size of Indian off-highway engine market,
Turnover by FY07 : 5,700 INR Cr
FY12 : 8,500 FY12 : 11,500 INR Cr
INR Cr Est. CAGR up to FY12 : 15%
Source : KOEL Research
Growth Path
CAGR 35%
CAGR 23%
10,000 New Projects
INR Cr
8,000
6,000
4,000 • Varsha Pump
• A350 engine
2,000 • Fire Pump
- Engines
FY07 FY08 FY09 FY10 FY11 FY12
Present Products

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 maker

diversified across geographies and markets

KOEL’s Markets
Major Markets - Engines
Domestic
– Agriculture – Pumps and engines for Farm Machinery
– Generating sets – 3 to 30 kVA, 30 to 600 kVA, 2000 to
6600 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

Agriculture – Engines and Pumps
Engines up to 20 hp
Water Cooled Air Cooled
Pumpsets

Power Generation
Engines & Gensets
Engines
Liquid Cooled Air Cooled
Gensets
3 to 600 kVA
2 to 6 MW
Construction & Industrial - Engines
Engines OEM
Series Customers :
Liquid Cooled
Air Cooled
Domestic Markets
Drivers and Competition
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 Harvester
manufacturers
Competition :
Up to 20 hp:
No national competitor. Only Regional competitors.
New Segment of Compact Pumps developed by Chinese
imports.
20 hp+: Simpson & Co.
Range Expansion, FY08 – FY09

Compact Pumpset “Varsha”
Compact high speed engines : 5 – 7 hp
“Kirloskar Green” Generating Sets
3 - 30 kVA, 30 - 600 kVA, 2000 – 6600 kVA

Domestic Market Drivers
Power 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 sets

running on diesel and gas from FY10

Power Generation
Up to 30 kVA
• Residences and Commercial Establishments
• Rising disposable incomes and consumption
• Changing Lifestyle
• Telecom is a big user
• Many sold in semi-urban and rural areas
Competition :
Mahindra and Mahindra
Cummins
Regional competitors

Power Generation
30 to 600 kVA
• Larger Commercial Establishments
• Investments in manufacturing, textiles and
garments, auto components, Information
Technology, Retail and such
Competition :
Cummins
Greaves

Power Generation
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 :
Cummins
Caterpillar
Wartsila
Other Imports

Fuel Options - Power Generation
New Fuels – lower emission

Gaseous Fuels
– 30 and 50 kVA Natural Gas sets introduced in
market. Will expand range based on market
demand
– 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 fuels

economically viable for sustainable use in
decentralised manner – grow and use locally
Construction & Industrial Machinery
Range 3 to 200 hp
• Investments in economy – such as roads,
construction, infrastructure up-gradation and
repairs, SEZs, townships, commercial buildings
• Changes in method - road making and
construction, urban repairs and garbage handling
and such
• KOEL engines are customised and have proved
performance on 100 applications
• KOEL’s proven delivery performance over years
• KOEL’s proven performance on upgrades to meet
changing technical and emission requirements

Construction & Industrial Machinery
Range 3 to 200 hp
Contractors ask for KOEL engines on machines due
to superior performance and after sales service
Range Extension
5 – 7 hp compact high speed engines in FY08

Domestic Market Drivers - Marine
2200 to 11000 hp engines for propulsion

• Technology is licensed from SEMT Pielstick
• Preferred supplier to Indian Navy and Coast Guard
for 18 years
• Order Board as on April 01, 2007:
– Marine Rs. 250 Cr.
– Stationary Power Plants Rs. 110 Cr.
Competition :
MTU, Germany

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

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 India
and KOEL is the leader
Competition :
Regional level engine manufacturers from India
Range Extension, FY09 :

5 – 7 hp high speed engines
Compact Pumps “Varsha”

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 long
delivery times
• KOEL is creating capacities to meet demand (EoU
for Gensets and Greenfield Engine Plant at Kagal)
Competition :
European Generating set manufacturers
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

New Products – FY08 and beyond
Result of in-house R&E
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 engine
Natural Gas Engines (300 / 10):
• 35 and 55 kVA introduced in market
Biodiesel Engines (Market developing):
• 15 and 45 kVA offered for cell sites
• In-house generating sets to run on biodiesel from
Jan. 2008
500 kVA manufactured engine (4000 / 450)
Present Share 20% with traded Engine:
• In-house designed and manufactured engine for
genset
“Varsha” for Agricultural Market
Entering New Segment
AV1XL
Varsha
For 12 to 18 m Head For 5 to 11.5 m Head

13 to 21.5 lps Discharge 3.3 to 13.5 lps Discharge
120 kg. 60 kg.
750 - 800 cc / h Fuel Consumption 450 – 500 cc / h Fuel Consumption

“Varsha” – Compact Pumpset
2007 Indian Market Size :

350,000 Units / INR 280 Cr

Compact High Speed Engine for
Industrial and Power Generation Market
TAF1 30,000 / INR 100 Cr
FA 350
Speed : 1500 / 1800 rpm Speed : 3000 / 3600 rpm

6 / 7.5 hp 5 / 7 hp
164 kg. 44 kg.
Generating sets and Construction Generating sets and Construction
Machinery Machinery
Natural Gas Generators
designed in-house

300 / INR 10 Cr
35 and 55 kVA introduced in market

Range will be expanded based on Market Study
Biodiesel Generators
designed in-house

Market Developing
• 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

Alliance with Waukesha
Products to market from FY10
• Waukesha makes 1200 gas engines per year and

is 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 / weight
ratio
• 1500 rpm, 2.4 to 3.6 MW range provides
opportunity 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
Products to market from FY10
• Exclusive manufacture for Global Markets of diesel

engines for generating sets
• In-house packaging of Gas generating sets for Indian
Market
• Opportunity to supply diesel engine components and
assemblies to Waukesha as several parts are common
for diesel and gas engines
• Manufacturing Feasibility Study in 6 months to decide
investments and plant location
Opportunity size 2007*

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

KOEL Sales Breakup
FY07 Vs. FY06, and,

Q1, FY08 Vs. Q1, FY07
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 such
as Tractors and Harvesters
Mobile Machinery
• Construction and Industrial Machinery
Stationary Equipment
• Generating sets and such
• Auto Components : Engine Bearings and Valves

KOEL Sales
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%. Growth
curtailed as unprofitable orders dropped
– Increase in sales of Bearings to OEMs but drop in
After Market
KOEL Sales Break-up
Sales FY07 (audited) Vs. FY06 (audited)

All in INR Cr, rounded off FY07 FY06 Change
Small Engines 361 256 41%
Medium Engines 1,199 793 51%
Large Engines 124 100 24%
Total Engines 1,685 1,148 47%
Sold to KFIL
Bearings 103 88 17%
w.e.f. Q4, FY07
Valves 22 18 22%
Auto Component 125 106 18% Unviable.
Castings 51 66 -23% Stopped.
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%
Engine Sales
increase 28% by volume & 47% by value
Qty., rounded off FY07 FY06 Change

Small 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
increase 10%
Market
INR Cr, rounded off FY07 FY06 Change Share*
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

Small Engine 45,300 41,000 10%
Total 59,800 54,000 11%

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
• KOEL’s equity in SEL is of strategic importance

Power Generation
Sales increase by 80%
Market
Cellular 270 85 218% 40 - 42%
PG non-Cellular 498 341 46% 40 - 43%
Total 768 425 80%
* = KOEL Research

Cellular 22,000 11,100 98%
PG non-Cellular 48,400 40,100 21%
Total 70,400 51,200 38%

Industrial & Construction Machinery
Sales increase by 50%
Market
Small Engines 16 12 30% 55 - 60%
Medium Engines 248 163 52% 52 - 56%
Total 264 176 50%
* = KOEL Research

Small Engines 10,300 8,000 29%
Total 34,400 23,700 45%

Engine Bearings & Valves
• Unprofitable business 140
120
INR Cr. 22%
curtailed in FY07
22
100
18
• Working on global 80 17%

60
alignments 40 88
103
• Valves EoU starts invoicing 20
in FY08
0
FY06 INC Cr FY07 INR Cr
Bearings Valves
44% 41%
56% 59%
FY06 FY07
OEM Sales After Market Sales

KOEL Sales Breakup
Q1, FY08 Vs. Q1, FY07

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

Sales, rounded off to INR Cr Q1, FY08 Q1, FY07 Change
Small Engines 90 81 11%
Medium Engines 325 246 32%
Large Engines 30 15 100% Division Sold to
TOTAL ENGINES 446 342 30%
BEARINGS 20 18 10%
KFIL w.e.f. Q4,
VALVES 4 5 -28% FY07
AUTO COMPONENT 23 23 2%
EXPORT 33 30 12%
Unviable. De-
CASTINGS 0 17 -100% emphasised.
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%

Financial Performance
Capital Use
5 Yr CAGR
Turnover 22%
Business TCE 18%
All in INR Cr Net Block 24%
500 Turnover 2,000 Net Current Assets 8%
450 1,800
400 1,600
Business
350 1,400 TCE
300 1,200 Net Block
250 1,000
200 800 Net Current
150 600 Assets
100 400 Turnover
50 200
0 -
FY03 FY04 FY05 FY06 FY07

Margins & Returns
Business ROCE is growing
50%
45%
40%
35%
30% RONW
25% ROCE
20% Business ROCE
15% Operating Margin
10%
5%
0%

Increase in Returns / Share
5 Yr CAGR
EPS 46%
Cash EPS 34%
100
INR Book Value / Share 24%
90
80
70
60
EPS
50
Cash EPS
40
30 Book Value / Share
20
10
-

Consistent increase in Profits
5 Yr CAGR
PBT 58%
PAT 44%
EBDIT 35%
Operating EBDIT 60%
Mkt Cap Market Cap @
350 3,000
INR Cr year end 116%
300 2,500 PBT
250
2,000 PAT
200
1,500 EBDIT
150
1,000
100 Operating EBDIT
50 500
Market Cap @
- - year end

Improving Employee Productivity
CAGR
No. of Employees -4%
Turnover (INR M)/ Employee 26%
7 4,000
6 3,500
3,000
5
2,500
4 Turnover (INR M)/
2,000 Employee
3
1,500 No. of Employees
2
1,000
1 500
0 -

Low Debt
1,200
INR Cr
1,000
800
600 Debt
400 Share holders fund
200
-

Investments
CAPEX Plan FY08 – FY10
900 INR Cr
Breakup in Businesses
13% 16% Small

Engines
Medium
Engines
Large
71% Engines
Breakup in years
18%
80% in Plant and Machinery
FY08
FY09
24% 58% FY10

Interest and Depreciation
INR Cr, rounded off FY07 FY08 FY09 FY10

Interest & Financing Cost 14 38 68 68
Depreciation 32 57 106 123
Total Financing Cost & Dep 46 95 174 191
Additionally, INR 11 Cr will be capitalised in FY08.
Debt will peak in FY09 – FY10.

Kagal Expansion
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 Engines
to Rajkot as good supplier base is available there. We
presently make these in Phursunghi in Pune.
Holding in KFIL
KFIL is secured source of castings for making

engines
• Current holding is 48%
• On Conversion of Warrants, holding will be 52%

Cautionary Statement
Statements in this presentation, particularly

those which relate to management’s views and
analysis, describing the Company’s objectives,
projections, estimates and expectations may
constitute “forward looking statements” within
the meaning of applicable laws and regulations.
Actual results might differ materially from those
either expressed or implied.

Contact at Kirloskar
Vijay Varma, Senior Vice President,

Kirloskar Oil Engines Ltd., Pune 411003, INDIA
E-mail : vijay.varma@kirloskar.com
Secretary : Ms. Uma Murali (um@koel.co.in),
Phone : +91(20)6608 4109 (DID)

Kirloskar Oil Engines Ltd. Welcomes You To Analysts Meet: Vijay Varma, Senior Vice President Pune, INDIA July 27, 2007

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Kirloskar Oil Engines Ltd. Welcomes You To Analysts Meet: Vijay Varma, Senior Vice President Pune, INDIA July 27, 2007

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Kirloskar Oil Engines Ltd.

July 27, 2007 Kirloskar Oil Engines Ltd. 2

FY07 FY08 FY09 FY10 FY11 FY12

July 27, 2007 Kirloskar Oil Engines Ltd. 4

Thereby, make KOEL a modern engine maker

July 27, 2007 Kirloskar Oil Engines Ltd. 5

July 27, 2007 Kirloskar Oil Engines Ltd. 7

Water Cooled Air Cooled

July 27, 2007 Kirloskar Oil Engines Ltd. 8

Liquid Cooled Air Cooled

4 to 100 hp engines and pumps

Range Expansion, FY08 – FY09

July 27, 2007 Kirloskar Oil Engines Ltd. 13

Range 3 to 6600 kVA

Range expansion to 1500 rpm 2.4 to 3.6 MW sets

July 27, 2007 Kirloskar Oil Engines Ltd. 14

July 27, 2007 Kirloskar Oil Engines Ltd. 15

July 27, 2007 Kirloskar Oil Engines Ltd. 16

2000 to 6600 kVA

July 27, 2007 Kirloskar Oil Engines Ltd. 17

New Fuels – lower emission

Developing Technologies to make bio fuels

July 27, 2007 Kirloskar Oil Engines Ltd. 19

July 27, 2007 Kirloskar Oil Engines Ltd. 20

2200 to 11000 hp engines for propulsion

July 27, 2007 Kirloskar Oil Engines Ltd. 21

• Increase OEM business

July 27, 2007 Kirloskar Oil Engines Ltd. 22

Agriculture : Up to 20 hp engines and pumps

Range Extension, FY09 :

July 27, 2007 Kirloskar Oil Engines Ltd. 23

Power Generation : 10 to 600 kVA

Construction & Industrial Machinery :

Range Extension, FY09 :

July 27, 2007 Kirloskar Oil Engines Ltd. 25

Agriculture Market ( 350,000 / 280) :

For 12 to 18 m Head For 5 to 11.5 m Head

July 27, 2007 Kirloskar Oil Engines Ltd. 28

2007 Indian Market Size :

July 27, 2007 Kirloskar Oil Engines Ltd. 29

Speed : 1500 / 1800 rpm Speed : 3000 / 3600 rpm

2007 Indian Market Size :

35 and 55 kVA introduced in market

2007 Indian Market Size :

• 15 and 45 kVA offered for Cellular Tower sites

July 27, 2007 Kirloskar Oil Engines Ltd. 32

• Waukesha makes 1200 gas engines per year and

July 27, 2007 Kirloskar Oil Engines Ltd. 33

• Exclusive manufacture for Global Markets of diesel

Opportunity size 2007*

July 27, 2007 Kirloskar Oil Engines Ltd. 34

FY07 Vs. FY06, and,

July 27, 2007 Kirloskar Oil Engines Ltd. 36

Sales FY07 (audited) Vs. FY06 (audited)

Exports 143 132 8%

Qty., rounded off FY07 FY06 Change

July 27, 2007 Kirloskar Oil Engines Ltd. 39

Qty., rounded off FY07 FY06 Change

July 27, 2007 Kirloskar Oil Engines Ltd. 40

• KOEL has supplied engines to PTL from 1972

July 27, 2007 Kirloskar Oil Engines Ltd. 41

Qty., rounded off FY07 FY06 Change

July 27, 2007 Kirloskar Oil Engines Ltd. 42