Kirloskar Oil Engines (KOEL) reported a disappointing set of numbers for 3QFY2016. Its top-line for the quarter declined by 1.8% yoy to Rs601cr. Employee expense as a percentage of sales increased by 34bp yoy to 8.5%, and other expenses as a percentage of sales increased by 181bp yoy to 19.6% of sales. This resulted in the EBITDA margin contracting by 137bp yoy to 8.1%. There was an exceptional expense of Rs10.4cr during the quarter related to Voluntary Retirement Scheme (VRS) for employees. Adjusting for the VRS expense, the net profit declined by 14.9% yoy to Rs29cr. Outlook to remain subdued in the near term: In the near term, we expect the company to witness some pressure on account of overall slowdown in the Genset industry. In addition, the absence of NPCIL orders in large engines segment has been impacting the top-line and profitability. The company has guided that although the near term outlook remains muted, it is hopeful about the longer term prospects. KOEL has expanded its capacity in the past and is positioned to successfully cater to improvement in demand once the operating environment changes in the longer run. KOEL also has taken measures to increase its focus on...