Anil Gupta, chairman and managing director, KEI Industries, in an interview with Swati Khandelwal of Zee Business, said technical collaboration with a Swiss Company, Pro Cable, has helped them in increasing the voltage range in their cables to 400kV (kilo-volt). He said that supplies of cables, power integration and export of cables and wires are going to be the growth drivers.
KEI Industries has completed fifty years. How will you sum-up this journey?
It has been a very difficult journey. I joined the business at the age of 20. We started with a factory and used it for production purposes, especially of appliance wires and one or two pairs of telecommunication cables. In the next five years, we moved to production of railway cables, control cables and small power cables and by 1991-92, we moved to production of low tension (LT) power cables. Meanwhile, we also tried our hands in non-ferrous metal alloy business, which performed well for some time and gradually slowed. The non-ferrous alloy business went down with the introduction of some high-value-added products in which we started using some import substitutions like synthetic fibres. But our main focus always remained on cables, mainly power cables. And in the process, we strengthened our capabilities in power cables in almost every factory that we have. In 2005, we stepped into the production of medium voltage cables like 11kV (kilo-volt), 22kV and 33kV cables, which remain our mainstream products till date. In 2010, we decided to increase the voltage range in our cables and added ranges of 66kV, 132kV and 220 kV. For this purpose, we entered into a technical collaboration with a Swiss company Pro Cable and used their technical and marketing assistance to open our project in Chopanki, Rajasthan. This is the mainstream product of our company today. In fact, we have used their technical assistance to enter into the voltage range of 400kV. ROW (rights of way) issues have led to the replacement of overhead transmission in many cities and areas with underground cables at present.
Do you see any opportunity related to infrastructural changes including laying of underground cables mainly in rural areas?
We also tapped the opportunities available in rural areas. We have executed several turnkey projects related to rural electrification and distribution. We executed several projects in two government schemes, namely Restructured Accelerated Power Development and Reforms Programme (R-APDRP) and rural electrification scheme also known as Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY) in several towns of Uttar Pradesh and Madhya Pradesh. In the process, we were responsible for erecting electric poles to distribution transformers as well as laying of the aerial bust cables, which was used to reduce AT&C (aggregate technical and commercial) losses. We also went for metering of consumers, which included meters of two types – below the poverty line meters and above the poverty line meters. In addition, under the overhead to the underground conversion process, in the recent past, we executed and handed over a project Rs 400 crore project in Varanasi.
At a time, when the face of the electrification process is changing and people are talking about wireless charging, electric vehicles. Let us know about KEI’s plans and area of focus for the next 50 years? Do you think that this change will bring a shift in your business model?
Turnkey projects that we executed in different segments like distribution, transmission and extra voltage cables are helping us move ahead. We are also eligible to work under the Smart City project of the government as we have the capabilities as well as qualifications and manpower to execute the projects. We have the expertise and required resources for underground cables, which will be replacing the overhead cables in time to come. When it comes to electric vehicles, we will be participating in the projects related to the infrastructure that will be required for their success. In addition, our company is also supplying cables for solar and wind energy projects. Besides, the government has plans to electrify railways by 2022. It is our forte and our company also has an expertise in developing sub-stations under the turnkey projects as well as overhead electrification with traction sub-stations for railways. Interestingly, we are executing certain projects in the domain.
What are going to be the growth drivers in terms of revenue?
Supplies of cables within and outside India, power integration through cables and export of cables and wires are going to be the three major growth drivers for us. Power integration means turnkey projects in supplying, laying and erection of cables in distribution and transmission side of the power. For supplies, we have been using two methods and they are direct sales to the institutions and also through the retail network that we have with us. We are exporting our wires and cables to nearly 24-25 countries. In fact, we export nearly 15% of our total production. These three are the forte of our business, of which 30% constitutes to be turnkey projects and the remaining 70% is related to the supply of the cables.
Do you think rupee fall will impact your business?
The challenge related to exchange rates is a temporary phenomenon and in the process, you will have to calculate the prices of the product on the basis of the exchange rate of the day when it was sold. In our case, we have created a natural hedge under which we nullify the imports through exports with no hope of any gain or loss. In the domestic market, we will have to compete with those companies who are operating under the same exchange rate.
Copper has led to an increase in input costs and the same is happening with other metals too. How will you deal with it?
Pricing related to copper or aluminium or any other raw material is passed directly to the customer. In fact, we keep raw material covered for the existing contracts. The pricing for the future contracts is decided on the basis of existing pricing levels as well as the perception. This practice has helped us in protecting our Ebitda (earnings before interest, tax, depreciation and amortisation) margin and we don’t play with the commodity.
Crude prices are going up. Do you think that it will impact your business?
We are not into refining. We just supply cables to oil refineries, and thus, our product is a capex expenditure over there, and thus, capex will not have any impact on our business. In fact, the oil export countries are bringing new capex and refineries as they have enough capital to increase their capacity.
KEI gave a phenomenal performance last fiscal. Do you think that growth is here to stay?
We have projected a growth of 18-20% in terms of volume for this fiscal and I think this is not a small growth number that we are targeting as you can’t achieve a growth of 25% year on year. Maintaining the growth numbers turns up to be a challenge when your base reaches a particular mark. In fact, we just want to maintain margin on profitability instead of chasing numbers.
What about profit margins?
I feel that there will be a margin improvement of 1 to 2% in the next one to two years and this growth will be supported by the growth in the retail segment and brand-building exercises. In addition, the increase in exports will also be contributing to this growth.
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