Exemplifying performance in India's wires and cables sector
Dear Shareholders,
I am pleased to present our first Integrated Annual Report for FY 2023-24.
This year's performance reflects our sustained efforts to strengthen our fundamentals
and accelerate growth while maintaining our commitment to quality, innovation, and
operational excellence.
It is with immense pride that I share with you details of our performance over the past
year and outline our growth plans.
OVERVIEW OF THE MACROECONOMIC ENVIRONMENT
The global economic environment was marked by macroeconomic volatility and geopolitical
tensions. In this challenging context, India's growth has remained resilient. This has
been driven by strong public capital expenditure, booming manufacturing and construction
activity, and robust private consumption.
In FY 2023-24, the Indian Gross Domestic Product (GDP) has grown by an impressive 8.2%,
making it one of the fastest-growing economies in the world.
PERFORMANCE REVIEW
FY 2023-24 stands out as an exemplary year for KEI Industries, marked by strong
performance and notable achievements. Our net sales reached Rs. 8,104 crore, up from Rs.
6,908 crore in FY 2022-23, reflecting a robust growth of 17.31%.
Our EBITDA for the year stood at Rs. 887 crore, marking a 20.81% growth over Rs. 734
crore in FY 2022-23. The EBITDA margin improved to 10.94%, up from 10.62% in the previous
fiscal year. This enhancement in margin underscores our operational efficiency, cost
management efforts and better product mix. Our Profit after tax (PAT) stood at Rs. 581
crore, a notable rise from Rs. 477 crore in the previous year, resulting in a growth of
21.72%. Correspondingly, the PAT margin improved to 7.17% from 6.91% in the previous
fiscal.
Our consistent financial performance underpins the effectiveness of our prudent
strategies and commitment to delivering sustainable value. We continue to focus on
optimizing our operations and expanding our market reach, ensuring a solid foundation for
future growth.
We have taken several measures to reduce our debt and strengthen our balance sheet. One
major initiative has been increasing the retail contribution to our revenue, which rose to
47% in FY 2023-24 from 29% in FY 2019-20. This shift has shortened the receivable period,
significantly improving cash flow and stability.
As of March 31,2024, India Ratings and Research and CARE has affirmed our long-term
rating at AA with a positive outlook, while ICRA have assigned us AA Stable. Our
short-term rating is equally robust, with all three agencies rating us at A1+. These
strong credit ratings are a testament to our fiscal prudence.
SEGMENTAL REVIEW
Our accelerated focus on the retail segment has yielded impressive results, with the
segment contributing 47% to net sales in FY 2023-24. This success stems from our
unwavering commitment to expanding our distribution network and enhancing brand presence
and customer outreach.
We have a comprehensive strategy in place to strengthen our distribution base, actively
engage with electricians, and increase the number of dealers/distributors and retailers.
Our digitalization initiatives, including integrating salesforce into our operations and
improving market intelligence, have bolstered our relationships with channel partners.
Additionally, we engage in targeted marketing and promotional activities to boost brand
equity. Through our proactive efforts, we aim to increase the retail business' share to
50% in the overall sales mix, reinforcing our dedication to quality, reliability, and
innovation.
Our institutional business continues to experience increasing demand from diverse
industries, including oil and gas, railways, metro rail projects, transmission, solar
projects, cement, steel, and real estate. In FY 2023-24, the institutional segment's
contribution to our overall sales mix was 40%.
The contribution of the EPC (excluding cables) was relatively modest, accounting for
5-7% of our sales.
Our international business has been a stellar performer, with exports contributing 13%
to our overall sales in FY 2023-24, up from 10% in FY 2022-23. Over the past years, we
have developed . a wide network of agents and marketing channels to promote our products
overseas. We are dedicated to meeting !. the rigorous requirements of our institutional
customers and continuously enhancing our pre-qualification credentials. Our efforts
include obtaining country-specific certifications, such as Underwriter Laboratory (UL)
approvals in the USA and various construction protocol approvals across Europe.
Our major export markets include Australia, Gambia, Liberia, UAE and the United States.
We have conducted specific type tests on our cables as required by several countries,
facilitating our entry into these markets. Our judicious efforts are bearing fruit,
allowing us to capitalize on the growing international market demand.
India's growing reputation as a reliable manufacturing destination, along with the
'China Plus One Strategy' adopted by companies diversifying their operations, presents a
promising outlook for Indian wire and cable manufacturers. Overseas demand for both LT and
HT cables is steadily increasing, driven by the renewable energy sector, energy generation
and distribution needs, and ongoing industrialization. Further, the rising energy
requirements due to rapid urbanization, population growth, and the shift to smart grids
are fueling global demand for EHV cables.
FORTIFYING OUR CAPEX INVESTMENTS
Our commitment to sustainable, long-term growth forms the cornerstone of our ambitious
goals. Over the past 15 years, KEI has consistently grown at a CAGR of 15%. Now, we are
setting our sights on even higher growth. We have embarked on a substantial capital
expenditure program, spending Rs. 400 crore in FY 2023-24. We plan to spend Rs. 900-1,000
crore in FY 2024-25 and an additional Rs. 500-600 crore in FY 2025-26.
One of our major initiatives is a massive greenfield project in Sanand, Ahmedabad, with
an estimated investment outlay of Rs. 1,700-1,800 crore. This project focuses on expanding
our capabilities in LT, HT, and Extra-High Voltage Cables (EHV), with the 1st phase of
commercial production set to begin by the end of FY 2024-25. We have already commenced
construction and plan to invest around Rs. 500-600 crore in FY 2025-26 to complete the
project. With this expansion, we aim to achieve a CAGR of 15%-16% over the next 3 to 4
years.
Our brownfield project at Chinchpada, Silvassa, will significantly enhance our wires
and cables capacity. The ongoing expansion at Pathredi will boost our LT power cable
capacity by around Rs. 800-900 crore per annum, with operations expected to commence in Q2
FY 2024-25. Plans on the anvil also include investing Rs. 50-60 crore in existing
brownfield capex at Chinchpada and Pathredi for further capacity additions during Q2 FY
2024-25.
This expansion program is expected to drive growth of around 16%-17% in the current and
next financial years.
FOCUS ON SUSTAINABILITY
We remain steadfast in our commitment to integrating sustainability into our operations
to generate lasting value for our stakeholders. Through our environmental conservation
initiatives, we strive to reduce our carbon footprint, minimize waste, and conserve
natural resources, ensuring a greener and cleaner planet. To this extent, we have made
strides to develop our green portfolio with the new launch of Conflame Green+ wires (HR -
FR-LSH - Lead Free). The product is designed with a focus on environmental conservation.
The production process incorporates the use of clean gas, which helps in reducing the
carbon footprint, improved waste management practices. KEI Conflame Green+ is more than a
house wire; it's a commitment to a sustainable future. "Next-Gen Living"
reflects our dedication to eco-friendly solutions, offering 360-degree safety features
that ensure comprehensive protection both inside and out.
We are deeply committed to making a positive impact on society through our
comprehensive CSR initiatives.
In collaboration with esteemed NGOs and Trusts, we focus on key areas of eradicating
hunger, promoting healthcare, promoting education, ensuring environmental sustainability,
protection of national heritage, art and culture and animal welfare. A significant step in
this direction is our partnership with ISKCON, a renowned global organization, to
establish a de-addiction center. This center will provide essential support to individuals
struggling with substance abuse, helping them rebuild their lives.
We continue to prioritize the highest level of occupational health and safety at all
our plants & sites to ensure the well-being of our employees. With these efforts, we
are meaningfully contributing towards building a sustainable world for future generations.
WAY FORWARD
As we look to the future, we are optimistic about the manufacturing sector's growth
potential in the coming decade. India is on track to become the third-largest economy
globally, driven primarily by favorable policies, technology, and significant investments
in infrastructure.
The government's focus on affordable housing, infrastructure development, urban
planning, and robust private capital expenditure set the stage for unprecedented
expansion. The massive outlay of Rs. 11.11 lakh crore for FY 2024-25 and an Rs. 80,671
crore allocation for the Pradhan Mantri Awas Yojana (PMAY) in the recent 2024-25 Budget
are expected to provide a boost to the domestic demand for cables and wires.
Key programs such as the Smart Cities Mission, PMAY (Urban), the Atal Mission for
Rejuvenation and Urban Transformation (AMRUT), Make in India, and Production-Linked
Incentive (PLI) schemes, will provide ample opportunities for the industry's growth.
Additionally, India's ambitious goals in renewable energy, coupled with the rising demand
for renewable energy sources and large-scale solar and renewable energy park projects,
bode well for India's wires and cables sector.
With a solid business model and well-charted strategy, we are poised to seize these
opportunities, driving growth and contributing to the nation's economic development. As we
embark on this journey, we do so with purpose and determination. We are aggressively
investing in enhancing our manufacturing capabilities and capacities to achieve
exponential growth in our business. At the same time, we are continuously fostering
innovation and new product development, driving technological advancements, and enhancing
our brand positioning to expand our retail reach and customer connect. This ensures we are
well-equipped to meet the rising customer demand for our products.
CONCLUSION
I express my sincere gratitude to our board of directors, employees, customers, channel
partners, bankers, suppliers, regulators, and all our shareholders for their continuous
faith and support, empowering us in our journey of enhanced growth and value creation.
Sincerely,
Anil Gupta
Chairman-cum-Managing Director