1) Security Premium:

The amount in the security premium account represents the additional amount paid by the shareholders for the issued shares in excess of the face value of equity shares

2) General reserve:

General reserve is created from time to time by transferring profits from retained earnings and can be utilised for purposes such as dividend payout, bonus issue, etc

3) Share options outstanding account:

The share option outstanding account is used to recognise the fair value of options to the employees of the Company and its Wholly Owned Subsidiary, under the employee stock option plans of the Company, which are unvested or unexercised as on the reporting date (Refer Note No 44)

4) Equity instruments Through Other Comprehensive Income:

This reserve represents the cumulative gains and losses arrising on the fair valuation of equity instruments measured through other comprehensive income, net of amounts reclassified to retained earnings when these equity instruments are disposed off.

5) Surplus/(Deficit) in the Statement of Profit and Loss:

This comprise of the undistributed profit after taxes.

Note: 26A

As the Company changed from ESOP policy to ESAR policy, an amount of H 921 lakhs was transferred from the share options outstanding account to general reserve in its financial statements for the year ended year 31 March 2022. However, the said amount should have been transferred to Securities premium account to comply with the provisions of Ind AS 102. As a consequence, the balance in the general reserve has been overstated and the balance in share options outstanding account and securities premium was understated. These line items have been restated in the financial statement in the comparative period as below:

Note 37: Earnings per share

Basic EPS amounts are calculated by dividing the profit for the year attributable to equity holders of the Company by the weighted average number of equity shares outstanding during the year.

Diluted EPS amounts are calculated by adjusting profit or loss attributable to ordinary equity holders of the entity, and the weighted average number of shares outstanding, for the effects of all dilutive potential ordinary shares.

(b) Defined benefit plans :

Gratuity : The Company has an unfunded defined benefit Gratuity plan. Every employee who has completed five years or more of service is eligible for a gratuity on separation at 15 days basic salary (last drawn salary) for each completed year of service. Where service is in excess of 15 years, full month's basic salary is considered for the calculation of gratuity.

The above sensitivity analyses have been calculated to show the movement in defined benefit obligation in isolation and assuming there are no other changes in market conditions at the reporting date. In practice, generally it does not occur. When we change one variable, it affects the other variables. In calculating the sensitivity, project unit credit method at the end of the reporting period has been applied.

The method and types of assumptions used in preparing the sensitivity analysis did not change compared to the previous year.

Risk Exposure & Asset Liability Matching

Provision of a defined benefit scheme poses certain risks, some of which are detailed hereunder, as companies take on uncertain long term obligations to make future benefit payments.

(1) Liability risks

(i) Asset-Liability mismatch risk-

Risk which arises if there is a mismatch in the duration of the assets relative to the liabilities. By matching duration with the defined benefit liabilities, the Company is successfully able to neutralise valuation swings caused by interest rate movements.Hence companies are encouraged to adopt asset-liability management.

(ii) Discount rate risk-

Variations in the discount rate used to compute the present value of the liabilities may seem small, but in practise can have a significant impact on the defined benefit liabilities.

(iii) Future salary escalation and inflation risk-

Since price inflation and salary growth are linked economically,they are combined for disclosure purposes. Rising salaries will often result in higher future defined benefit payments resulting in a higher present value of liabilities especially unexpected salary increases provided at management's discretion may lead to uncertainities in estimating this increasing risk.

(iv) Unfunded plan risk-

This represents unmanaged risk and a growing liability. There is an inherent risk here that the Company may default on paying the benefits inadverse circumstances. Funding the plan removes volatility in Company's financials and also benefit risk through return on the funds made available for the plan.

B. Disaggregation of revenue from contracts with customers

The entire revenue from contracts with customers is recognised at point in time and pertain to one line of business i.e., wind power generation.

The information relating to trade receivables from revenue from operations is disclosed in Note No. 8 and 11

Note 44: Stock option schemeEquity Settled Stock Appreciation Rights Plan 2019 (KIL ESARP 2019)

The Company had passed Special Resolution through Postal Ballot and approved - 'Kirloskar Industries Limited - Employee Stock Aprreciation Right Plan 2019' ('KIL ESARP 2019') on 29 December 2019 and authorised the Board to create, offer and grant from time to time, in one or more tranches, to employees of the Company and its subsidiary company 4,85,000 equity shares of H 10 each fully paid up. The Company had granted an aggregate of 4,70,898 ESARs exercisable into not more than 4,85,000 equity shares of the Company face value of H 10 each fully paid up.

In terms of the KIL ESARP 2019, the vested ESARs upon exercise shall be settled by way of allotment of equity shares. Options granted under KIL ESARP 2019 would vest after minimum period of 1 (one) year but not later than a maximum period of 4 (four) years from the date of grant of such options. Any option granted shall be exercisable according to the terms and conditions as determined

by the Nomination and Remuneration Committee and as set forth in the Grant Letter. The number of equity shares allotted would be the product of the number of ESARs exercised and the proportion of appreciation in each ESAR as compared to the market price on the date of exercise. The appreciation would be the excess of market price of the equity share over the ESAR Price in terms of the KIL ESARP 2019. No shares shall be allotted in case there is no appreciation in the price of the shares. Upon the exercise of the options, the amount equivalent to the face value of the shares allotted would be payable by the employees to the Company.

Under the KIL ESOP 2017 Plan, the cost of equity-settled transactions (options granted) is determined by the fair value at the date when the grant is made using an appropriate valuation model. That cost is recognised as "employee benefits expenses" together with a corresponding "increase in Stock Options Outstanding reserves in Equity", over the period in which the vesting conditions are fulfilled by the employees.

KIL ESOP 2017 Plan was modified and was introduced as KIL ESARP 2019.

1) For unvested options of KIL ESOP 2017, in compliance with ‘IND AS 102: Share Based Payment':

> The Company has recognised incremental fair value of ESAR which shall be amortised over the vesting period as per KIL

ESARP 2019.

> This is in addition to the fair value of original options which will be amortised over the remaining vesting period of original

options under KIL ESOP 2017.

2) For options already vested, incremental fair value shall be recognised over the vesting period of KIL ESARP 2019.

3) Further, fair value of new ESARs granted shall be recognised over the vesting period of KIL ESARP 2019.

I Fair value of the options granted:

The Company has recorded employee stock-based compensation expense relating to the options granted to the employees on the basis of fair value of options.

The fair value of the options granted is mentioned below as per vesting period. The fair value of the options is determined using Black-Scholes-Merton model which takes into account the exercise price, the term of the option (time to maturity), the share price as at the grant date and expected price volatility (standard deviation) of the underlying share, the expected dividend yield and risk-free interest rate for the term of the option.

Employee-benefit expenses recognised in the standalone Financial Statements

The Company has recorded employee stock-based compensation of H 290 Lakhs (Previous Year: H 238 Lakhs) out of which H64 Lakhs (Previous Year: H 64 Lakhs) has been recognised in the Statement of Profit and Loss and H 225 Lakhs (Previous Year : H 140 lakhs) has been recognised as deemed investment in Wholly Owned Subsidiary relating to the options granted to the employees of the Company and its Wholly Owned Subsidiary for the year ended 31 March 2023.

The following methods and assumptions were used to estimate the fair values / amortised cost as applicable

i) The fair values of equity instruments are measured using Level 1 hierarchy. There have been no transfers among Level 1, Level 2 and Level 3 during the year.

ii) The management assessed that the fair value of cash and cash equivalents, other bank balances, trade receivables, trade payables, deposits and other financial assets and liabilities approximate their carrying amounts.

The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

(iii) The fair value of the quoted equity shares are based on the price quotations at reporting date.

(iv) The fair value of unquoted instruments - The Company has carried out fair valuation of investments in equity shares of unquoted instruments based on discounted cash flow method under income approach based on valuation carried out by an independent valuer. The unquoted instruments are measured using Level 3 hierarchy.

(v) The fair value of other financial liabilities as well as other financial assets is estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities.

(vi) The fair value of debt component of unsecured OCDs is computed by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities.

Note 47: Financial risk management

The Company's activities exposes it to market risk, liquidity risk and credit risk. This note explains the sources of risk which the entity is exposed to and how the entity manages the risk.

The Company has in place a mechanism to identify, assess, monitor and mitigate various risks to key business objectives. Major risks identified are systematically addressed through risk mitigation actions on a continuing basis.

(A) Market risk

Market risk is the risk of any loss in future earnings, in realisable fair values or in future cash flows that may result from a change in the price of a financial instrument. The value of a financial instrument may change as a result of changes in the interest rates, foreign currency exchange rates, equity price fluctuations, liquidity and other market changes. Future specific market movements cannot be normally predicted with reasonable accuracy.

The Company does not have any foreign currency obligation nor does it have any borrowings. Accordingly, the Company does not perceive any foreign currency risk or interest rate risk.

(B) Equity price risk

Equity price risk is related to the change in market reference price of the investments in equity securities. The fair value of the Company's investments measured at fair value through other comprehensive income and fair value through profit and loss exposes the Company to equity price risks. These investments are subject to changes in the market price of securities.

The fair value of Company's investment as at 31 March 2023, in quoted & unquoted equity securities was J 1,46,452 Lakhs (Previous Year : J 1,18,595 lakhs quoted equity shares) and J 9,204 Lakhs in quoted mutual funds (Previous Year : Nil in quoted mutual funds ). The impact of change in equity price risk is as under:

(C) Credit risk

The Company is exposed to credit risk from its operating activities (primarily trade receivables).

I. Trade receivables

Credit risk is the risk that one party to financial instrument will cause a financial loss for the other party by failing to discharge an obligation. To manage this, the Company periodically assesses the financial reliability of customers, taking into account the financial condition, current economic trends, analysis of historical bad debts, ageing of accounts receivable and forward looking information. Individual credit limits are set accordingly. The credit period offered to customers is 30 days from the date of invoice.

Credit risk on cash and cash equivalents and other bank balances is insignificant as the Company generally invests in bank deposits and liquid mutual funds with high credit ratings.

(D) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due and to close out market positions. The flexibility in funding requirements is met by ensuring availability of adequate inflows.

The Company had no outstanding bank borrowings as of 31 March 2023 and 31 March 2022. The working capital of the Company is positive as at each reporting date.

The table below summarises the maturity profile of the Company's financial liabilities based on contractual undiscounted payments.

Note 48: Capital Management

The Company's objectives when managing capital are to :

- safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders, and

- Maintain an optimal capital structure to reduce the cost of capital.

The Company's capital structure completely comprises of equity component. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares etc.

No changes were made in the objectives, policies or processes for managing capital during the year and during the Previous Year.

Note 49: Ratio

The Company is termed as an Unregistered Core Investment Company (CIC) as per Reserve Bank of India Guidelines dated 13 August 2020 and is not exposed to any regulatory imposed capital requirements. Thus, the following analytical ratios are not applicable to the Company.

1) Capital to risk-weighted assets ratio (CRAR)

2) Tier I CRAR

3) Tier II CRAR

4) Liquidity Coverage Ratio

Note 50: Relationship with Struck off Companies

During the year the company has not made any transactions with companies struck off under section 248 of the Companies Act, 2013 or section 560 of Companies Act, 1956.

Note 51: Event after reporting period

According to the management's evaluation of events subsequent to the Balance Sheet date, there were no significant adjusting events that occurred other than those disclosed/given effect to, in these Financial Statements as of 31 March 2023.

Note 52: Dividend

The Board of Directors has proposed Final Dividend ofH 11 ( i.e. 110%) per equity share for FY 2022-23. (Previous year Final dividend H 10 per equity share i.e. 100%).

Note 53

Previous year's figures have been regrouped wherever considered necessary to make them comparable with those of the current year.