KEC International bags two orders for Train Collision Avoidance System worth Rs 600 crore

Vimal Kejriwal, MD & CEO of KEC International

Transmission tower manufacturer KEC International has got two orders for Train Collision Avoidance System (TCAS) aka the Kavach system, worth Rs 600 crore, MD and CEO Vimal Kejriwal told CNBC-TV18 on June 6. He added that while they haven’t seen many tenders yet, there is “tremendous scope for more”.

The KEC orders come after the recent tragic three-train collision in Balasore, Odisha, which has brought attention to the implementation of TCAS systems. The accident claimed 288 lives and injured around 1,000. It was reported that the route did not have Kavach.

Prospects big

Kejriwal expressed optimism about the future prospects of Kavach (TCAS) technology and highlighted the immense market potential for it. “The opportunity is very large, but we have not seen too many tenders or orders coming out of it. However, now with all the sound and fury about Kavach, I do expect that some more orders will get released, there is capacity if the orders are released,” he said.

Kavach is currently installed on a limited percentage of trains, estimated to be around 5-7 percent of the entire fleet. With approximately 20,000 trains in operation, the potential market size for train collision avoidance systems in India is substantial.

He added that KEC has entered into a strategic partnership with Kernex Micro to “enhance expertise and expand reach”. It aims to leverage the combined strengths of both companies to provide cutting-edge Kavach Systems.

Notably, Kavach was developed by the Railway Ministry’s Research Design and Standards Organisation, in collaboration with Medha Servo Drives, HBL Power Systems and Kernex Microsystems. It was brought under the Atmanirbhar Bharat initiative in the 2022 Union Budget.

Performance

In terms of financial projections, KEC anticipates a growth rate of 15 percent or higher this year, supported by an order book of over Rs 31,000 crore. Kejriwal said that KEC’s FY24 margin guidance is at 7 percent; with 6 percent in H1 and 8 percent in H2.

On the Brazilian operations, he noted that they had debt of $50 million, of which $25-30 million has been refinanced.

Regarding the company's exposure to the Afghan market, he shared that KEC has a net exposure of around Rs 250 crore. "To date, we received nearly Rs 50 crore, with an agreement in place for an additional Rs 150 crore. The company is actively engaged in discussions with financial institutions such as the World Bank and Asian Development Bank (ADB) to secure the remaining amount," he added.

Watch full interview here