KEI Industries may start a Greenfield Construction next year: Anil Gupta, CMD
Our margins are stable and marginal improvement has been seen on a quarter-on-quarter basis in it. As far as commodity prices are concerned then I would like to say that commodity prices don't have any impact on our margins because we either keep/book them along with the order.
Anil Gupta, Chairman & Managing Director, KEI Industries Ltd, talks about the quarter results and the key growth drivers, margins, coronavirus impact, QIP and rural electrification among others during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts:
Q: What were the highlights and growth drivers of Q3FY20 for the company?
A: Major growth drivers of the quarter included exports, cables, extra-high voltage cables and retail.
Exports: went up by almost 50% in this quarter.
Cables: There was an increase in cables that are sold to the institutional segments.
Extra-high voltage cable: The segment has grown by almost 60-65% when compared to the same quarter of the corresponding year.
Retail: It grew by 14-15% in the third quarter.
Thus, the overall growth that stands at 21% were backed by the support of these four segments.
Q: But such an expansion was not seen in the front of margins. What could be the reason for it? Do you see any headwind for commodity
A: Our margins are stable and marginal improvement has been seen on a quarter-on-quarter basis in it. As far as commodity prices are concerned then I would like to say that commodity prices don't have any impact on our margins because we either keep/book them along with the order. We will maintain the same policy in future as well. So, margins are purely based on working grounds but not on the commodity prices. The commodity prices movement is adjusted under our selling prices.
Q: What is your outlook on margins? Do you think that there can be an improvement in it in recent future or the trend will be maintained?
A: We will try to improve the margins by a quarter per cent to half per cent. Such an increase will have a positive impact on net profit. Margins also depend on top-line growth and capacity utilisation of the plant - capacity utilisation increase has a marginal impact on the margins - because fixed cost remains the same.
Q: Do you think that the coronavirus impact in China will have an impact on your business or not?
A: Our imports are least dependent on China. We hardly import anything from China and that's why I don't think that this problem of China will have any impact on our company. But, it will have an impact on worldwide export and supply chain management because every country is interdependent today. For instance, we export our cables to Australia and some other companies but China supplies certain equipment for certain projects and any impact on the supply of that equipment is likely to have come impact for a month or two. But, there is no visibility of the same and none of our customers has reported to us about the same.
Q: Do you think it as an opportunity for you because such a concern in China may have increased sourcing from different parts of the world and will you like to contribute to the same?
A: Yes. We expect that our exports may increase in the countries that also import products from China as well as us. But it is hard to quantify the same at this moment. Hopefully, we can estimate in the next one-two months.
Q: You raised a fund of Rs500 crore through QIP. How much debt reduction you are targeting by the end of this fiscal and the next?
A: It has helped in debt reduction but the purpose for QIP included debt reduction as well as growth. We may start a new Greenfield construction next year with an investment of around Rs400-500 crore in the project. This investment will be made to increase our cable manufacturing capacities by 50-60%. And, we are conceiving a product mix of each segment - namely extra-high voltage cables, high-tension/medium voltage cables and low-tension cables - in it. This fund will be used for debt reduction until it is not invested in the expansion work. But, we have always said that our debt levels will not go up further despite this expansion that will need an investment of Rs500-600 crore in the next one to one and a half year.
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Q: Update us about the total order book of the company and do you foresee demand recovery in time to come? And, rural electrification was a major booster for wire companies. So, will you work on such projects that will increase the demand for your cables?
A: We have an order book of approx. Rs4,500 crore. As far as rural electrification is concerned then the program is on and several projects related to it are under execution. Wires and cables are required for these projects. I think, underground cabling projects, which falls under urban distribution expansion/strengthening, will be started in different states. Such projects will help in reducing the AT&C losses and enable the technical fault-free supply of the electricity. It will stop electricity theft and technical losses which occurs due to hooking in the overhead cables. Besides, it improves the aesthetic looks of the cities. Several such projects, underground cabling projects, are in finalisation stage and I think the tenders for the same are likely to be out by April-May.
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