Experts Column

Govt initiatives augur well for T&D industry

Vimal Kejriwal, MD & CEO, KEC International Ltd.

Boost to the T&D sector
The government has announced several initiatives to revive the power sector since the time has come into power. Briefing on whether these initiatives started delivering or no Vimal Kejriwal, MD & CEO, KEC International Ltd says, “The new initiatives have provided a boost to the transmission and distribution (T&D) sector. The Indian government’s dedicated intervention has led to the sector garnering enhanced thrust and focus. Several initiatives are being taken across the value chain to create a very facilitative environment that is conducive for the growth of the entire power sector. Initiatives such as UDAY, ‘Power for all’, complete village electrification drive etc, augur well for the T&D sector.”

Integration of Green Energy into Grid
Informing about one initiative that would be a game changer Kejriwal says, “A multitude of factors have led the evolution of Indian power sector over the years. The way I see it, encouraging initiatives like achieving uniform power rates across the country through the mission, ‘One Nation, One Grid, One Price’ and successful integration of green energy into the grid are expected to be game changers for the sector.”

Integration of grids
Explaining on the initiatives taken to improve the health of the industry Kejriwal says, “The integration of the southern grid with the central grid is a noteworthy achievement, which has enabled seamless transmission of power across India and empowered the country with one national grid. Due to this, congestion levels have reportedly reduced by significant levels. With these, the T&D architecture seems to be evolving and marching in the right direction.”

Since April 2014 up till March 2017, India has witnessed a 40 per cent increase in transformation capacity and over 25 per cent increase in transmission lines, which is commendable. “On the backdrop of these initiatives, and several significant investments that are being planned, the outlook for the sector is quite optimistic and it is very well poised to showcase substantial growth levels in the coming years,” Kejriwal adds.

De-risking business
KEC International Ltd continued to deliver improved performance in the face of challenging headwinds globally. It’s focused strategy of de-risking the business through geographic spread and diversified business portfolio has yielded good results. More than 50 per cent of its business consistently comes from outside India. “In FY17, we successfully entered or reentered eight new countries. We were successful in rebalancing our Middle East portfolio with order wins in Oman, Jordan and Egypt. The pie of our international substation business is growing significantly,” informs Kelriwal

KEC closed the last financial year with a very strong set of numbers. It achieved a PAT of Rs. 305 crore, nearly double as compared to the year before. On the back of improved efficiencies, the EBITDA margin has reached a level of 9.3 per cent. The company’s overall order intake increased by 42 per cent, year-on-year. As a result, its order book grew by 35 per cent and closed at Rs 12,631 crore. It delivered significant improvement in margins for the year. Its credit rating for short term borrowings was upgraded from A1 to highest possible A1+ by CARE and ICRA ratings.

The company’s performance for Q1 FY18 continues to be good. Revenues have grown to Rs 1,895 crore in Q1 FY-18, a growth of 6 per cent from the previous year, despite the uncertainties associated with GST. EBIDTA margins have grown to 9.3 per cent as against 8.4 per cent in Q1 last year. A focus on execution efficiency, commercial closures, reduction in interest costs and effective taxation rate, have resulted in a growth in PBT and PAT, which have grown by 79 per cent and 104 per cent respectively.

The markets continue to reward its solid performance, with its market capitalisation crossing Rs 8,500 crore recently (on September 12, 2017).
He adds, “Underlying our efforts on project execution, we are working on accelerated project delivery and have been able to close several projects ahead of schedule, both in India and overseas. We expect the momentum to continue this year. In addition to progress on our core business front, our focus in the coming years will be to tap emerging opportunities in newer geographies, as well as ensure faster and sizeable growth in our emerging businesses, including railways, solar, substations, underground cables, cabling and civil.”

Focusing on core strength
The industry is all set for a massive rebound, Kejriwal reveals about the company’s innovative strategies to remain competitive he says, “We continuously differentiate ourselves to create enhanced value for all our stakeholders and are one of the most preferred partner of choice in India and across the globe. Focusing on the core strengths and profitability from the core, we continually unlock new sources of growth by expanding into adjacent businesses. We continue to capitalise on our strong industry fundamentals, excellent project management and manufacturing capabilities and well maintained and nurtured vendor relationships to tap emerging opportunities in existing as well as newer geographies.”

KEC believes in continuously raising its benchmark and strive towards enhanced levels of excellence. It also understands that it is necessary to re-invent and innovate. A few years ago, the company underwent an organisation-wide transformation exercise aimed at further enhancing its project management and execution capabilities which has enabled us to deliver several projects ahead of scheduled completion. Likewise, last year KEC partnered with another global consultant for turning around its cables business.

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