Union Budget 2021: KEC International's stock is up over 7%, here's why

MD & CEO Vimal Kejriwal talks about how the company, whose shares have outperformed the market since the Budget was announced, benefits from the measures

February 02, 2021 / 03:55 PM IST
KEC INTERNATIONAL

KEC INTERNATIONAL

 
 
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It is a sight that Vimal Kejriwal has seldom seen in his 18 years at KEC International Ltd, the flagship company of RPG Enterprises. Share of the company started inching up on February 1, after Finance Minister Nirmala Sitharaman presented the 2021 Union Budget, and ended the day marginally higher.

"After a long time I saw my share price going up after the budget," Kejriwal, who took over as the MD & CEO of the company in 2015, told Moneycontrol.

That was not the only unusual occurrence on Monday. Unlike other Budgets, Kejriwal also heard the Finance Minister discuss in length plans of the government to invest in the infrastructure space, with sectors such as power, roads, railways, and water projects getting a lot of attention. "I was very happy to hear things like power transmission being discussed in the Budget. It was seldom done before," says the industry veteran.

Not surprisingly, the two are connected - the rise in KEC's shares and the focus on the 2021 edition of Budget, on infrastructure.  The company India's second-largest manufacturer of electric power transmission towers and one of the largest Power Transmission Engineering, Procurement & Construction companies in the world. It also has a presence in railways and recently venture into water projects.

Sitharaman announced a 34 percent increase in the capital outlay of Rs 5.5 lakh crore in the next financial year, with a focus on the roads, power, and railways sectors. She expanded the  National Infrastructure Pipeline to 7,400 projects, from 6,835. The industry also welcomes the setting up of Development Financial Institution, which will help to fund long term projects.

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"There is a deep focus on overall infrastructure development, including healthcare and agriculture infrastructure, bank recapitalization, and doubling MSME allocation. The budget if implemented properly is the ideal tonic that the economy needs, following the Covid-19 pandemic," says Sanjeev Agarwal, Chief Executive Officer, Protiviti Member Firm for India

For KEC, these measures promise opportunities in growing its order book. Little wonder that on Tuesday morning, at the time of writing, the KEC stock had inched even higher. It was up 7.74 percent, at Rs 396.85 a share.

The positives

KEC's biggest business generator is the power sector.

"The government has announced funds to strengthen distribution. This will also help the distribution companies (discoms)," Kejriwal said. The funds for the discoms is part of the new package for the industry, worth Rs 3.5 lakh crore.

The Finance Minister also announced a fund infusion of Rs 1,000 crore for Solar Energy Corporation of India,  and Rs 1,500 crore for Indian Renewable Energy Development Agency Ltd. "All that will result in additional investment in renewables, increasing the demand for more transmission lines," the KEC chief executive said.

Railways is another focus area for the company. The Union Budget announced a record Rs 1.10 lakh crore for the railways, with emphasis on the eastern and western freight corridors. The government plans to electrify all broad gauge routes by 2023. Also, a system to prevent train collisions on the high-density routes will be set up.

KEC would be looking at the pie and get orders as it specializes in electrification, signalling and civil infrastructure.

The anti-collision system alone could turn out to be Rs 40,000 crore opportunity, as it entails upgrading the entire signalling and communication infrastructure on high-density routes, including Mumbai-Delhi and Chennai-Mumbai.

Kejriwal expects details on specific projects to be revealed in the coming quarters, and this will lead to tenders being floated. "In the second or third quarter of the next financial year, we would see an impact on the order book," the KEC MD & CEO said.
Prince Mathews Thomas heads the corporate bureau of Moneycontrol. He has been covering the business world for 16 years, having worked in The Hindu Business Line, Forbes India, Dow Jones Newswires, The Economic Times, Business Standard and The Week. A Chevening scholar, Prince has also authored The Consolidators, a book on second generation entrepreneurs.
first published: Feb 2, 2021 03:55 pm

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