KEI Industries has bagged an order worth Rs 384 crore from Power Grid for supply and service contracts under Integrated Power Development Scheme in Varanasi, said the company’s Chairman and Managing Director, Anil Gupta.
Gupta said this order will open up fresh opportunities for the company in future, while highlighting that the margins might take time to improve.
The company’s consolidated order book is currently at Rs 2,100 crore, of which Rs 1,200 crore is in the engineering procurement construction (EPC) segment, Gupta said.
“This is the first order under the scheme which was announced by the government at the start of 2015 with an intention to strengthen the distribution system and reduce transmission losses. This project will provide greater visibility to the company in this segment, although margin improvement might take time’, Gupta said.
Gupta expects KEI’s topine to grow at 23 percent year on year during FY16 and a similar growth in FY17 aided by the strong order pipeline and strength in export markets.
EBITDA margins are expected to be over 10 percent in the coming years, Gupta said.Below is the verbatim transcript of Anil Gupta\\'s interview with Ekta Batra & Anuj Singhal on CNBC-TV18.Ekta: Talk about the order from Power Grid Corporation of India worth around Rs 384 crore. What does it mean from the company in terms of margins as well as future orders from Power Grid? A: This is the first order under Integrated Power Development Scheme (IPDS) which was announced by the Government of India at the beginning of 2015. However, most of the distribution companies are coming out for the new tenders under IPDS. The intention under this project is strengthening of distribution system and also metering up to the end consumer to reduce aggregate technical and commercial (AT&C) losses. This is a significant order. We are proud to have it in the city of Varanasi, which is the constituency of our honourable Prime Minister. It is a challenging task and it will definitely give much more visibility to the company in this segment. However, so far as margins are concerned - that will come in due course of time. We expect good growth for the company in terms of topline and bottomline from this as well as it will give us an opportunity to get much more business from Power Grid in future.Anuj: Could you tell us the kind of revenue growth and profit growth you will be able to report with the kind of order book that you have now?A: We have around Rs 1,200 crore of orders in hand in engineering, procurement and construction (EPC) segment after adding this order. I have already said that this year we expect topline growth of around 23 percent compared to last financial year. However, with strong orders in pipeline, I expect similar growth in the next financial year as well because other than EPC, we have other cable segments like extra high voltage cables.In my last interview I had said that our exports have shown substantial growth and we expect 50-60percent growth in export in this financial year compared to last. Ekta: Rs 1,200 crore from the EPC segment is where your order book currently stands. What is it on a consolidated basis? Can you share that with us and how much more are you expecting in terms of incremental orders?A: The total order book of the company at the moment stands at around Rs 2,100 crore and we are hoping that by end of this year we have order booking of around Rs 2,500 crore which will be carried forward to the next year. Anuj: Your margins are in high single digits. Do you think you can improve that to double digits at any point?A: We expect 10 plus EBITDA in the coming times and I am sure we will be able to maintain it.
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