The Supreme Court has directed the constitution of a three-member arbitral tribunal to adjudicate the long-pending dispute arising from a family settlement involving Kirloskar Brothers Limited and several members of the Kirloskar family.

In an order dated August 11, 2026, the apex court disposed of Special Leave Petitions filed by the company and others, upholding the Bombay High Court’s earlier decision to refer the matter to arbitration. The court appointed former Kerala High Court Chief Justice Nitin Madhukar Jamdar as the nominee arbitrator for the petitioner and former Madras and Rajasthan High Courts Chief Justice K. R. Shiram as the nominee for the contesting respondents.

Arbitration Framework

The two nominee arbitrators are required to jointly appoint a presiding arbitrator, preferably within four weeks. The seat of arbitration is designated as Pune. The Supreme Court clarified that all preliminary issues regarding arbitrability, including the scope of Clause 20 of the Deed of Family Settlement (DFS) dated September 11, 2009, will be decided by the tribunal before proceeding to the merits of the claims.

Key procedural directives include:

• The High Court’s observations in its May 3, 2021 judgment have no binding effect on the arbitral tribunal.
• All issues must be decided on their own merits by the tribunal.
• The tribunal has the liberty to fix its own procedure and remuneration.

Background of the Dispute

The conflict stems from the DFS executed in 2009, which allocated management control of various Kirloskar Group entities among different family branches and included non-compete obligations. The company, along with Sanjay Kirloskar, instituted a civil suit in June 2018 seeking specific performance of the DFS and damages for alleged breaches of non-compete clauses.

Respondents sought reference to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996. While the Civil Judge in Pune rejected this application in December 2020, the Bombay High Court reversed the decision in May 2021. The Supreme Court’s recent order resolves the jurisdictional challenge, leaving substantive questions—such as whether non-signatories to the DFS are bound by the arbitration agreement—to be determined by the tribunal as preliminary issues.

Kirloskar Brothers Limited stated that the financial impact of these proceedings cannot be presently ascertained.

Kirloskar Brothers reported a consolidated net profit of ₹676 million for the quarter ended June 30, 2026 (Q1FY27), remaining virtually unchanged from ₹675 million in the same period last year. Despite a 12.8% year-on-year rise in revenue to ₹11,049 million, profitability was constrained by margin compression and exceptional costs related to new labor regulations. The company’s consolidated orderbook expanded by 21% to ₹40,622 million, providing robust visibility for future revenue despite short-term headwinds.

Financial Performance and Margin Dynamics

Consolidated revenue from operations increased to ₹11,197 million in Q1FY27 from ₹9,949 million in Q1FY26. However, EBITDA margins contracted to 11.8% from 13.0% in the prior year quarter due to higher operational costs. The divergence between top-line growth and bottom-line stagnation highlights ongoing pricing pressures and cost inflation in the sector.

Standalone performance showed similar trends, with revenue rising to ₹6,898 million from ₹6,330 million year-ago. Standalone net profit after tax stood at ₹540 million, up from ₹470 million in Q1FY26. Earnings per share (basic) were reported at ₹6.80 for standalone operations and ₹8.39 for consolidated operations, compared to ₹5.93 and ₹8.40 respectively in the previous year.

Impact of New Labour Codes and Overseas Mix

A significant factor affecting the quarter’s results was the implementation of the Government of India’s New Labour Codes, notified with effect from November 21, 2025. The company recognized an incremental past service cost of ₹262 million for the quarter ended March 31, 2026, and ₹414 million for the full year ended March 31, 2026. These costs, classified as exceptional items, relate to post-employment defined benefits for employees.

On the international front, revenue grew 19% year-on-year, driven by SPP USA and Kirloskar Brothers Thailand Limited. However, international EBITDA margins moderated to 5.1% from higher levels, primarily attributable to a lower contribution from the services business which traditionally carries higher margins. Management expects services contracts in the chemical and petrochemical sectors to improve in subsequent quarters as energy prices stabilize in Europe.

Strategic Shifts and Orderbook Growth

The company is actively reducing exposure to low-margin Engineering, Procurement, and Construction (EPC) orders. EPC contribution has dropped from 10% in FY20 to just 3% in FY26, reflecting a strategic pivot towards higher-margin product sales and services. This shift is supported by strong order inflows, particularly in the Oil & Gas segment, where sales surged 418% year-on-year, and Marine & Defence, which saw a 93% increase.

Chairman and Managing Director Sanjay Kirloskar noted that the improved standalone net profit growth of 14.9% indicates a gradual improvement in the profitability mix. The consolidated orderbook expanded by 21% to ₹40,622 million. The standalone orderbook stood at ₹23,754 million, led by Irrigation + Water Resource Management (₹10,127 million) and Power (₹5,992 million). A correction in the investor presentation clarified that the industry orderbook is ₹1,497 million, not ₹556 million as initially misprinted.

Presentation Correction

On August 3, 2026, Kirloskar Brothers issued an updated investor presentation to correct a typographical error on slide 10. The correction was disclosed to the Bombay Stock Exchange and National Stock Exchange of India Ltd under Regulation 30 read with Schedule III, Part A Para A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. Company Secretary Devang Trivedi confirmed that the revised document supersedes the version released on August 1, 2026, and no other financial data or strategic disclosures were altered.