KEC International Annual Report- Key Takeaways
10-06-2022

Theme: Empowering Sustainable Growth

"We build infrastructure to empower people and nations; we build with a focus to sustain the environment; we build to deliver responsible growth for our stakeholders. We firmly believe that to build sustainable businesses, we need to create a sustainable ecosystem of environment, society, safety and governance.

As one of the most respected Engineering, Procurement, and Construction companies globally, we remain committed to develop businesses that promote overall sustainability, as well as embed planet-friendly initiatives across our operations to preserve the environment. Our effort towards building a better world is reflected not only in our green business portfolio but also in our work processes, people & safety practices, ethical culture & conduct, and CSR initiatives to touch lives of people and communities around us.

Our years of experience and unwavering commitment for a brighter future reaffirm our confidence to deliver sustained growth and create value for our stakeholders, as we continue to build infrastructure for the world of tomorrow."

This is visible in company's sustained order book growth across the geographies. 

Mixed Business Performance for FY22

Revenue: Rs 13,742 Cr (5% year on year growth)

Operating Profit: Rs 904 Cr (21% year on year decline)

Operating Profit Margin: 6.6% (vs 8.7% in FY21)

Order Book: Rs. 23,716 Cr (24% year on year growth)

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Diversified Order Book:

Power T&D (45%)

Civil (29%)

Railways (16%)

SAE (5%)

Oil & Gas (3%)

Cables (1%)

Others (Smart Infra + Solar) (1%)

Geographically diversified geograpphical mix:

Railways- The business continued its growth momentum and achieved revenue of Rs. 3,860 crore, a growth of 13% despite COVID-19 related challenges. The company continues to leverage synergies with our Cables business to improve competitiveness of the Railways business. In order to strengthen the Railway supply chain, it has enhanced backward integration to manufacture new railway cables such as contact wires, feeder, jumper and dropper wires, catenary conductors, signalling power cables, railway OFC cables, and Quad cables for railway applications. We are also in the process of developing a few more cables for the Railway segment. The company continues to manufacture galvanised steel structures for Railways at our tower manufacturing units.

Civil- One of our key growth drivers this year, the business has added over 20 new projects and 10 new clients in FY22 and is currently delivering world-class construction for over 40 projects across sectors. In line with our growth plan, the Civil business has achieved a revenue of ~ Rs. 1,900 crore, a remarkable growth of ~75% compared to last year. The business has also delivered its highest ever order intake of over Rs. 5,800 crore across sectors, paving the way for significant revenue visibility in FY23.

Urban Infrastructure- In line with our strategy to expand into adjacencies, the company is currently executing 15 projects with a combined project value of Rs. 5,500 crore. The company is now constructing viaducts and stations for seven Metro and RRTS projects, which include two projects each for Delhi Metro Rail Corporation, Kochi Metro Rail Corporation and Chennai Metro Rail Limited, one for National Capital Region Transport Corporation to construct a section of the Delhi-Meerut RRTS. It is building over 55 km of elevated viaducts, crossing over metro lines, railway lines, flyovers, and rivers, in addition to 43 stations in high density urban areas.

Oil & Gas Pipelines- The acquisition of KEC Spur Infrastructure Private Limited (name change post acquisition) is in line with our vision to strategically expand our business portfolio into adjacencies and create valuable synergies to scale up the Oil & Gas Pipelines business. Secured significant orders of over Rs. 300 crore post acquisition of KEC Spur Infrastructure from PSUs such as IOCL and GAIL, and a large order for laying slurry pipelines for a reputed steel major. The business is presently executing over 20 projects for marquee customers such as Indian Oil Corporation Ltd. (IOCL), Gas Authority of India Ltd. (GAIL), IHB Ltd., Indraprastha Gas Ltd. (IGL) and Bharat Gas Resource Ltd. (BGRL), including the Tundla-Gawaria pipeline project, KGPL pipeline project, Sultanpur-Jhajjar-Hissar pipeline project and BGRL projects for Ahmednagar & Sangli gas authorities.

Cables- KEC continues to diversify our portfolio by adding new products to tap into the growing cables market globally. The Cables business delivered a quantum leap in revenue during the year and achieved a growth of 44% along with significant improvement in profitability, on the back of higher sales in Power cables and Railway cables segment and increased efficiency in manufacturing and procurement. Strategic enabler for KEC’s other businesses; ~40% of captive consumption contributed by Railway and T&D businesses.

Solar- Delivered projects aggregating to over 33 MW during the year, including one of Asia’s largest solar carport project for a reputed automobile manufacturer and four rooftop solar projects for an automobile ancillary company. The company successfully completed four Operations & Maintenance contracts, exceeding performance guarantees.

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Future Prospects:

• Given the inflationary pressure in the economy, KEC expects further hardening of interest rates in the next year. They are fully prepared to manage the debt and interest costs by better management of working capital through efficient execution of projects, war room focus on collecting receivables, judicious use of foreign borrowing and innovative solutions with our banking partners.
• The company continues to be very careful while allocating capital to maximise the returns to our stakeholders. It continues to optimise our capital expenditure, which remained at ~1% of our revenues.
• The Company is expecting the momentum to continue with orders of significantly higher values in the automobile and auto-ancillary, cement, metals & mining, chemicals, and warehousing. Going forward, the Company is expecting significant growth in areas such as hydrocarbons and public spaces and plans to tap these segments. As the capex cycle picks up across government and private sector, the Company foresees significant investments in segments such as warehouses and data centres, in addition to industrial, residential, water segments, wherein the Company has delivered world-class infrastructure over the years.
• As part of backward integration strategy to enable tighter control over the supply chain and enhance our competitiveness, KEC continues to manufacture galvanised steel structures for our Railway and Solar businesses, with a capacity of 60,000 MTPA.
• KEC continues to lay emphasis on developing new products, and have developed eight new cables during the year, especially for our Railways business. This is in line with our plan to make the Cables business a strategic enabler for Railways business and address the growing demand for railway products in the external market. Continues to develop more products catering to varied applications, for the domestic and exports market.
• Over the years, KEC has designed various types of transmission line towers, substations - AIS, GIS & Hybrid, and solar structures for projects located in varied terrains and geographies. KEC is continuing to augment our engineering team for Civil and Railways businesses and have developed capabilities to design Metro Rail systems including viaducts and stations, water supply networks, residential, commercial & industrial buildings, overhead electrification systems, Metro power supply systems, etc. They have also formed centres of excellence for PEB structures, MEP systems, BIM, and geotechnical designs.
• Overall, IMF expects the global growth to deaccelerate to 3.6% in the year 2022 as well as 2023. While it expect the slowdown in growth in countries in North Africa, Latin America, and CIS but our focus countries in Middle East, SAARC, EAP, and sub-Saharan Africa are likely to benefit or remain insulated from the global economic challenges.
• Growth in India in FY23 will be supported by widespread vaccination coverage, benefits from supply side reforms, improving position of banking system, and availability of fiscal headspace to increase capital spending. Overall, it expects the infrastructure project pipeline to remain healthy, however, the impact of inflation, if any, is yet to be seen. Further, quantitative tightening across the globe may lead to increase in finance costs, but the weakening of rupee is likely to benefit players such as KEC

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