Captains Speak     

Published: March 15, 2024
Updated: March 15, 2024

KEI Industries

Rs 1,500-cr capex to expand capacities

New Delhi-headquartered KEI Industries, among the top three organized players in the Indian wire and cable industry, has chalked out an ambitious capacity expansion plan involving a capex of around Rs 1,500 crore spread over the next three-four years. The company, also an EPC player in the power T&D segment, has a diversified business model with a significant presence in domestic and international markets.

At the same time, the company has also undertaken a greenfield expansion programme at Patherrdy in Rajasthan with a capex of Rs 110 crore, which will increase the capacity of low-tension power cables by approximately Rs 800- 900 crore per annum. This plant will go on stream by Q1FY2025. The company has also planned a greenfield plant for cables and wires at Sanand in Gujarat at a capex of Rs 300 crore. The first phase of this plant will be completed by Q4FY2025.

Further, the company will spend approximately Rs 400 crore to Rs 500 crore of capex in the next financial year each year on the Sanand plant, and another Rs 400 crore each year for the next 2 subsequent years. This will allow the company to maintain a CAGR of around 15-16% per annum in the next few years.

ALL INDICES UP

Reviewing the performance of the company during Q3FY2024, Mr Gupta said that in the December 2023 quarter, net sales were Rs 2,061.72 crore, up 15.55%. EBITDA was Rs 228.72 crore, up 16.72%. EBITDA/net sales margin was 11.09% as against 10.98% in the same period of the previous year. Profit after tax this quarter was Rs 150.67 crore, up17.15%. PAT/net sales margin was 7.31% versus 7.21% last year.

According to Mr Gupta, domestic institutional cable sales were Rs 556 crore in the third quarter against Rs 630 crore last year. Domestic institutional sales of extra high voltage cables was Rs 184 crore against Rs 93 crore in the previous year. So the growth was 97%. Export sales in this quarter were Rs 284 crore, out of which cable was Rs 195 crore, which was Rs 103 crore last year. With all products put together, exports were Rs 284, for export growth of 98%.

Total cable institutional sales were 45% as against 46% in the previous year period. Sales through the distribution network were Rs 949 crore in the third quarter against Rs 816 crore in the same period last year. Growth was approximately 16%. B2C sales contributed 46% in the third quarter. Sales in thr EPC division other than cable were Rs 146 crore, up 53%. Out of the total sales of EPC, EHV cable sales were Rs 32 crore as against Rs 25 crore in the same quarter last year. Sales of stainless steel wire was Rs 46 crore against Rs 54 crore last year. There was a volume increase in the cable division on the basis of production for consumption of metal in Q3 as compared to the previous year.

EARNINGS STEADY

during the first nine months (April to December 2023), Rajeev Gupta, CFO, revealed that for the nine months net sales stood at Rs 5,791 crore, up 16.8%. EBITDA growth was 19.41% and EBITDA margin 10.82%, as against 10.59% in the previous year. PAT was Rs 412.27 crore, up 21.51%. PAT/net sales margin was 7.12% versus 6.84%.

According to Mr Gupta, capacity utilized during 9 months in FY2024 was 95% in the cable division, 70% in the house wire division and 89% in the stainless steel wire division. During the 9 months, the company incurred a capital expenditure of approximately Rs 308 crore. Out of this, Chinchpada and Silvassa incurred Rs 65 crore, Pathredi Rs 30 crore, Sanand Rs 167 crore, and other plant locations Rs 46 crore. India Ratings and Research Private Limited has affirmed its long-term rating as AA with a positive outlook. The ICRA and CARE long-term rating is AA stable. The short-term rating from India Rating, ICRA and CARE is A1+. The book value per equity share of the company is Rs 333 as against Rs 287 as on March 31, 2023.

BUOYANT DEMAND

As regards the industry outlook, Anil Gupta maintains that the demand scenario is good for the company in terms of public sector and private sector capex. India has emerged as a fast-growing economy, and there are substantial opportunities available for exports as well. "So we expect good growth in our wire and cable segment in the next few years." In India, the structures are mainly solar capacities which are being added, says Mr Gupta. Another capex pipeline is in infrastructure like highways, metros and railways and even power. And even the construction sector is also doing substantially well, which includes large construction-filled projects like hotels, hospitals and other real estate sectors. The manufacturing sector in India has good potential to grow with a lot of PLI schemes and the private sector adding capex in the manufacturing sector. Increased investments in the telecom sector are also giving a boost to electrical cables, especially in telecom infrastructure.