Kirloskar Brothers Limited (KBL) has taken legal action against a substantial GST demand, marking a significant development in the company's ongoing tax dispute with Andhra Pradesh authorities.

Writ Petition Filed

Directors of Kirloskar Brothers Limited have filed a writ petition with the Andhra Pradesh High Court, challenging GST demand notices totaling Rs. 15.48 crore. These notices are related to tax arrears from a joint venture project involving KBL, IVRCL Ltd., and Megha Engineering & Infrastructure Ltd. (MEIL).

Details of the Dispute

The dispute centers around a project executed for the Water Resources Department of the Government of Andhra Pradesh. The tax authorities initially issued notices to the majority of KBL's directors on January 21, claiming tax arrears of Rs. 15,48,06,528 for the year 2023-24. However, a subsequent demand notice dated August 5, revised the claim to Rs. 15,48,02,928 for the year 2017-18.

Legal Proceedings

KBL had previously filed a separate writ petition on August 12, challenging the demand notice. The Andhra Pradesh High Court granted an interim stay against recovery proceedings on August 20. The directors' recent writ petition, filed on November 19, seeks to set aside the impugned assessment order and demand notices, along with an interim stay pending the petition's resolution.

Financial Implications

The company has stated that the financial implications of this legal dispute cannot be ascertained at this juncture, given the ongoing legal proceedings. KBL has committed to informing the stock exchanges of any further developments in this matter.

Tabular Summary of Key Points

This legal challenge by Kirloskar Brothers Limited underscores the complexities that can arise in tax matters, especially those involving joint ventures and inter-state projects. The outcome of this case may have implications not only for KBL but also for other companies engaged in similar multi-party, cross-state projects.

CRISIL Ratings Limited has revised the outlook on Kirloskar Brothers Limited (KBL) long-term bank facilities to 'Positive' from 'Stable', while reaffirming the rating at 'CRISIL AA'. This upgrade reflects the company's improving financial profile and business prospects.

Key Highlights of the Credit Rating Action

• Long-term rating reaffirmed at 'CRISIL AA' with a revised outlook to 'Positive'
• Short-term rating reaffirmed at 'CRISIL A1+'
• Total bank loan facilities rated: Rs. 1,700 crore

Breakdown of Rated Facilities

The upgrade in outlook signifies CRISIL's expectation of a potential rating upgrade over the medium term, subject to KBL maintaining its improved financial and operational performance.

Company Performance and Outlook

Kirloskar Brothers Limited, a leading manufacturer of pumps and valves, has been focusing on strengthening its market position and operational efficiency. The company's recent financial results and order book suggest a positive trajectory:

• Consolidated revenue for Q2 stood at Rs. 1,028.00 crores
• Order book (excluding small pumps business) at Rs. 2,127.00 crores, showing a 13% year-on-year growth
• Domestic subsidiaries registered 14% year-on-year revenue growth

The company is actively pursuing growth opportunities in various sectors, including power, urbanization, and data centers. KBL's Chairman and Managing Director, Sanjay Kirloskar, expressed confidence in meeting the company's growth targets, citing a strong order book and ongoing plant improvements.

International Business Performance

KBL's international operations have shown mixed results:

• US operations: 21% year-on-year growth (constant currency)
• Thailand: 158% year-on-year growth (constant currency)
• South Africa: 27% growth (constant currency)
• UK operations: Facing temporary softness due to order delays

The international order book has expanded by 25% year-on-year to Rs. 1,289.00 crores, indicating strong global demand for KBL's products and services.

Future Outlook

With a diversified portfolio and focus on operational excellence, Kirloskar Brothers Limited appears well-positioned for sustainable growth. The company is actively pursuing opportunities in emerging sectors such as data centers and is optimistic about the power sector's growth potential, including both thermal and nuclear power stations.

The positive outlook from CRISIL reflects the expectation of continued improvement in KBL's business and financial risk profile. Investors and stakeholders will be keenly watching the company's performance in the coming quarters to see if it can capitalize on its strong order book and translate it into robust financial performance.