India has weathered the global crisis relatively well, and even as high
inflation remains a major concern, India''s economy is expected to grow
at 8% this year in comparison to 8.5% during 2010-11.
On the global front, the sovereign debt problems that have beset the
euro area over the past year now threaten larger economies in the
region. In the US, concerns over a sovereign default loom over
financial markets, with potentially disruptive consequences for global
capital flows. Japan is dealing with the challenges of recovering from
the impact of the tsunami amidst deeper recessionary tendencies. In
striking contrast to advanced economies, emerging market economies
(EMEs) have generally been dealing with rising inflation, caused by a
combination of elevated commodity prices and robust domestic demand.
The IMF, in its June, 2011 Update of World Economic Outlook (WEO),
revised downwards its estimates for global growth in 2011 to 4.3 per
cent from its April 2011 estimate of 4.4 per cent. More importantly,
according to the IMF, downside risks to global growth have increased on
account of continuing sluggishness in major advanced economies due to
the weak labour and housing markets, and lingering sovereign debt
concerns. Globally, while growth is set to decelerate, inflation is
expected to edge up in 2011 reflecting higher commodity prices and
strong demand in EMEs. Although prices of cotton, rubber and metals
have softened in the recent period, crude oil prices continue to be
volatile and the outlook on this front remains uncertain. The IMF''s
projection is that consumer price inflation is likely to increase from
1.6 per cent in 2010 to 2.6 per cent in 2011 in advanced economies, and
from 6.1 per cent to 6.9 per cent in emerging and developing economies.
Business Overview 2010-11
Year 2010-11 was satisfactory for your company, where Company achieved
top line growth of 29% compared with previous year. However,
profitability continued to be under tremendous pressure due to
oversupply in the industry, leading to cut-throat competition, lower
capacity utilizations and immense pressure on pricing and margins.
On the industry front, during the second half of the financial year
2010-11, there was improvement in the demand scenario of the Industry
which has resulted in the significant growth of turnover compared to
previous year. In the medium and low voltage power cable field, the
growth is fuelled by the boom in the power, industrial, realty and
During the year 2010-11, Company completed expansion at its Chopanki
Plant for manufacturing of Extra High Voltage (EHV) Cables ranging from
66kV to 220kV. With the manufacturing of EHV Cables, your Company will
be only the third Indian Company to manufacture EHV Cables up to 220kV.
During the year under review, your Company achieved EHV Cable sales of
Rs. 1400.00 lacs. However, the key highlights that transpired for your
company in the year under review was the receipt of order worth Rs. 75
Crores for EHV Cables.
In addition, in line with the spurt in economic and industrial output
in the year under review, your company recorded good sales in the power
and utilities vertical, thereby further strengthening its leadership
positioning in the power sector, along with strong orders from the
industrial segment. I am confident that this development will help your
company further strengthen its leadership positioning in the power
sector and enhance presence in the industrial segment.
Your Company joined hands with M/s Brugg Kabel AG, a company having
over 100 years of experience and expertise in manufacturing EHV ranging
from 66Kv to 550 KV in the previous year and entered into Technical
Collaboration for manufacturing of EHV Cables up to 220kV. This
technical Collaboration will entail complete know-how transfer,
including designing, manufacturing, testing techniques, training of its
manufacturing/design personnel in manufacturing of cables, etc. This
technology will enable KEI to establish a stronghold in the EHV cable
segment and enable it to secure contracts in the power segment from
both the government and private sector.
Engineering, Procurement and Construction (EPC)
Your Company has marked its presence into Engineering, Procurement and
Construction (EPC) space by bagging various prestigious orders
primarily in the State of Madhya Pradesh. This EPC contract is on
turn-key basis for survey, supply of materials, erection, testing &
commissioning of 33kV & 11kV substation and distribution lines in power
distribution segment, which was awarded by MP State Power Distribution
Companies. This EPC contract has been awarded to the company under
RAPDRP Scheme, Feeder Separation Scheme & Rajeev Gandhi Gramin
Vidyutikaran Yojna (RGGVY).
Strengthening EHV Cable segment
The fastest growing segment is that of high voltage cables which is
projected to be double in the next three years. Presently, most of the
demand for 132 KV, 220 KV and 400 KV XLPE cables are met through
import. In addition to the projected growth in power generation and
transmission, the rapid pace of urbanization is also expected to
contribute to enhanced demand for underground high voltage cable
installations in place of overhead lines. The Extra High Voltage cables
segment enjoys both excellent demand prospects and is also marked by
higher margins in comparison to MV and LV Cables.
It is against this background that our full technical collaboration
with Brugg assumes importance as it will also enable us to entrench our
positioning in the EHV space by virtue of our ability to provide
invaluable design and process solutions to our customers in executing
EHV turnkey contracts. This Collaboration will enable KEI''s positioning
amongst the top three companies addressing the 220 kV EHV space, boost
our preparedness and pre-qualification to participate in large utility
tenders and also give a firm impetus to our turnkey EPC business, which
consumes significant portion of EHV cables.
We believe that, going forward, with Company''s clear focus on this
segment, coupled with its proactive and strategic initiatives and
strengths to grow its presence in this space, almost 10% of your
company''s revenues in FY12 will accrue from this segment.
Retail – domestic house wires
During the last three years the domestic house wires segment has shown
tremendous growth. The encouraging results clearly reinforce your
company''s excellent product and quality offering, endorse its cables''
specialist positioning and also vindicate the myriad 360 degree brand
communication and distribution & dealer enhancement initiatives
undertaken over the last few years. During the year under review,
Company appointed additional 130 number of dealer / distributor across
Pan-India. Having reached so far, your company is all set to increase
house wire sales contribution to over Rs. 200 crore in the coming
fiscal by further augmenting distribution network and strengthening
brand building activities.
With the complete meltdown witnessed in the company''s key markets of
presence in Middle East and Africa, a sharp revenue erosion was
witnessed in the previous year. With the global recovery underway and a
definite spurt in demand, the export market is expected to slowly and
steadily improve in the next year. The Company has achieved Export
Sales of Rs. 10344.71 lacs during financial year 2010-11 as compared to
Rs. 9362.60 lacs during previous year, showing a growth of 10%. Your
Company has been awarded Trading House” status based on its export
performance. With the global recovery underway and a definite spurt in
demand, I expect improved performance of KEI in this segment.
Recognition and Awards
Your Company has been conferred with the prestigious Superbrand Status.
Superbrand is a Global Standard of Brand Excellence which enables
significant emotional and physical advantage over competitors. It pays
tribute to world''s leading brands selected by consumers and experts.
It provides access to globally respected accreditation. It boosts up
brand image as well as business volume and values.
Further, Det Norkse Veritas (DNV), has awarded following accredited
certification to KEI''S Management System.
ISO 9001:2008 for Company''s Quality Management System. It provides a
framework for focus on customer and product requirements, process
performance and effectiveness with emphasis on continual improvement
and objective measurement.
OHSAS 18001:2007 for Company''s proactive protection of the health and
safety of the workforce. It shows Company''s commitments to the health
and safety of its employees, reduces overall liability, reduces
occurrence of ill health and injuries and provides assurance that legal
compliance is effectively managed.
OHSAS 14001:2004 for company''s Environment Management System. It shows
Company''s systematic approach in minimizing negative impact on the
environment and surrounding community. An effective environment
management system can significantly reduce the Company''s Environmental
impact, increase operational efficiency and identify opportunities for
Strategic direction & outlook
As I look ahead at 2011-12, the future looks bright and promising. As
mentioned earlier in my letter, the demand for cables has already
picked up and is expected to get a positive impetus. I see a positive
scenario for your company in view of the overall macro-economic
indicators and indices prevailing currently. Armed with enhanced
capacities, turnkey solution offerings, focused approach in its
domestic house wires and EHV segment, your company, I am confident, is
well positioned to deliver exceptional growth and success going
I want to thank our board of directors for their counsel and support
and our employees for their tireless efforts in ensuring KEI''s delivers
on its ambitious promises and plans. I also take this opportunity of
expressing my sincere thanks to the Central Government, Government of
Delhi, the Government of Rajasthan, the Government of UT Dadar Nagar
Haveli, the Financial Institutions and Banks for the encouragement and
support to your company at all times.
But most of all, thank you for your continued faith and support has
helped us take path-breaking decisions that promise to propel your
company to higher echelons of success and glory.