Vimal Kejriwal, MD and CEO of KEC International, expects transmission and distribution segment to continue to remain a major revenue driver this year and in the near future.
Around 40-45% of the company's current order pipeline of around ₹1,35,000 crore is in the transmission space split between India and international. The rest is divided between civil, railways, and solar segments.
Kejriwal expects the ordering activity to pick up pace and more orders to be awarded in the July-September quarter.
Last week, KEC International secured new orders worth ₹1,025 crore in the T&D and cable businesses.
A note by Emkay highlights the golden decade for EPC players, predicting a multifold increase in budgetary capex and robust growth across various sectors.
This is the verbatim transcript of the interview.
Q: Quick word first about this ₹1,025 crore order that you won last week. What does this take your order book to and what's in the pipeline in the next six months now that the election-related uncertainty is out of the way and we should expect policy continuity?
A: Our order book with this order is roughly slightly above ₹30,000 crore and we have L1 of more than ₹8,000 crore. So it's almost ₹38,000 crore of the order book.
Q: I just wanted to know the pipeline.
A: As I said, one is we have an L1 of ₹8,000 crore now that elections are over. So I think most of our government plans are taking their board approvals, etc. So we should start seeing more orders coming in, and more of the L1s getting translated. As far as the pipeline is concerned, our overall pipeline today is around ₹1,35,000 crore, some of which are already tendered out and quoted, which results are not yet out, and others will be quoted in the next one or two months.
Broadly, if you look at the breakup, almost 40-45% of this ₹1,30,000 crore is in the transmission between India and international, and the rest is between civil, railways, and solar.
Q: Do you expect this trend of transmission to drive a major portion of your orders as well? So you mentioned that you are L1 for another ₹8,000 crore. Which segment is the one that is leading that ₹8,000 crore?
A: If you look at the numbers, almost 90% is T&D. But not only India, it is also international and SAE but a large portion is India. And a lot more tenders, which you have quoted in the India T&D, which we expect to see the results. So clearly, India T&D is definitely going to be the leading driver of our revenue and all that this year, and maybe for the next couple of years also.
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Q: You said all the government bodies are now quickly going to their board to take approvals to start the ordering process or execution process?
A: They are going in to start the awarding process. Most of these tenders have already been quoted. In many cases, they were opened before the elections. But I think because of the restrictions, people did not want to take the chance of giving the awards. So like this one, we already have one power grid order where they got the approval, so they have already released it. And we got some railway orders earlier last week also, a week before that. I think slowly these orders are going to their boards and getting awarded.
The tendering process had not actually stopped, but many of them had not opened orders, tenders, etc., which should now happen. So I think in Q2, you will see a lot more ordering happening than what we had seen in Q1.
Q: Do you have guidance or an expectation for the kind of order wins we could see in the second half of the year?
A: We don't have exactly for the second half, but for the year we had said we should be doing around ₹25,000 crore and we have now announced with this it's been around ₹4,000 crore. So ₹21,000 crore is a balance for the next three quarters.
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Q: I wanted to talk to you about this underground cabling project which is there in West Africa which is around a 225-kilovolt project if I'm not wrong. Now considering the geopolitical landscape over there currently, do you see any hindrance to the development of that project? What are you hearing from the ground over there?
A: We have been working in various countries in West Africa as well as in East Africa so this is in a country where it's relatively quite okay and we have been very conscious of the geopolitical risks when we take projects. And this is not just underground, it's a mix of cabling, substation and transmission line put together and it's multilaterally funded. I think we are very comfortable with the project.
Q: Even Solar is expected to be a big growth driver. I think you spoke about it in your investor analyst meeting. Can you detail your expectations and plans and how you plan to grow that business?
A: We have bid for some large projects and we are bidding for some more. In fact, our L1 does have one Solar. So, we expect that with the government's emphasis on power supply, and especially on the renewable side, we will get some more projects. What was keeping us back was the contractual terms and all that, where a lot of liabilities were getting shifted onto the EPC, and also the module pricing. Now, I think most of the large developers have realised this issue. And so now the contracts are, I'll say, evenly balanced between the developers and the EPC. Because of this, I think we are very hopeful that this business will definitely grow.
Q: To quantify that, you are expecting around ₹25,000 crore this year, how much of that would be solar?
A: Solar - I don't have the exact number, renewable sources around 8 to 10% of this.
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