KEI Industries Ltd Q2 FY2025 Concall Summary

Key Takeaways

• 17% revenue growth, margin slipped: Net sales grew 17.21% YoY in Q2, but EBITDA margin contracted to 10.42% from 10.88%, partly on a mix shift from EHV to HT cables.
• EHV execution stalled, not lost: Domestic Institutional EHV sales halved YoY to ₹73 cr as projects sat unexecutable due to right-of-way and clearance delays; capacity was diverted to HT, which jumped to ₹431 cr.
• ₹2,000 cr QIP to stay debt-free: The fundraise fully funds the Sanand greenfield, avoiding term debt and preserving the company’s stated debt-free posture while keeping the growth pipeline intact.
• Order book healthy at ₹3,847 cr: Pending orders plus an L1 position of ₹186 cr in Tata Power 220 kV cables provide near-term visibility, even as EHV lumpiness persists.
• What to watch next quarter: Whether EHV clearances unlock and convert the backlog into revenue, the pace of Sanand construction spend, and any movement on the hinted promoter holding increase.

Revenue Drivers & Channel Mix

• Dealer/distribution network drove the quarter: B2C contributed 55% of Q2 sales vs 47% last year, while Institutional and export sales were relatively weaker, tilting the mix toward the higher-velocity channel.
• HT cables filled the EHV gap: Because EHV orders could not be executed, that capacity was used for medium-voltage and high-voltage power cables, pushing HT sales from ₹271 cr to ₹431 cr YoY.
• Volume growth moderated on inventory build: H1 volume growth on a metal consumption basis was ~14% vs ~18% last quarter, as finished goods inventory rose when some materials could not be dispatched in exports and EHV.
• Export contribution structurally intact: The prior-quarter export decline was a one-off logistical issue at the customer end; full-year export contribution is guided at 12% to 13% with no structural problem going forward.
• Sector-level mix is deliberately opaque: Management declined to break out revenue by end-use sector (renewable, wind, transmission), citing the dealer/EPC channel structure where the final application is not recorded in the system.

EHV: The Quarter’s Drag

• EHV sales collapsed on execution bottlenecks: Domestic Institutional EHV cable sales fell to ₹73 cr from ₹169 cr in Q2, driven by right-of-way issues, non-clearances from utilities, heavy rains, and road-cutting permission delays.
• The order book exists but is stuck: Projects are awarded and in the backlog, yet cannot be executed until site clearances come through; management expects full-year normalization.
• Margin impact was contained: The EHV-to-HT shift carries a 4% to 5% margin differential, but on the incremental ₹70–₹100 cr of HT sales, the absolute EBITDA impact was only ₹3–₹4 cr.
• EPC deliberately shrinking: The company is cutting EPC exposure, taking only one order per year to maintain staff; quarterly volatility from site conditions (rains, no ROW permissions) reinforces the decision to wind down. EPC will not exceed 5% to 6% of total sales this year.

Anil Gupta: "Because nowadays, the cost of creating assets as compared to what we have previously created has substantially changed over the last whatever the factories we've built up 5 years back, now the construction cost has doubled. Plant and machinery has almost gone up, almost doubled."

Capacity & Capex

• Brownfield complete, utilization has headroom: Chinchpada and Pathredi expansions were fully commissioned in H1; post-completion utilization stood at ~78% in Cable, 71% in House Wire, and 93% in Stainless Steel Wire.
• Sanand greenfield on track for FY26 production: Commercial production for LT, HT and EHV cables will commence by Q1 FY26; construction began in FY24, and a further ₹600 cr will be spent next financial year to complete the project.
• Sanand will add ~₹5,000 cr capacity: That capacity is expected to be fully utilized only by FY27 or FY28 at the latest; next year’s contribution from the entire project is only ~₹900 cr.
• Future capex run-rate of ₹500–₹700 cr per year: To sustain 17%+ growth, capacity must be built ~2 years in advance; land acquisition in Baroda is underway, and the next greenfield will target low-voltage and medium-voltage, not EHV, at a lower cost than Sanand.
• No further fundraise or debt needed: Management has calculated projections for the next 5 to 7 years and states the current QIP plus internal cash accruals will fully fund the growth plan without additional debt or equity.

Rajeev Gupta: "We have calculated the projections for next 5 to 7 years. Accordingly, we have taken this decision. So we will not require for any further amount either from the debt or from the fundraising for the future growth of 17% plus."

Margins & Costs

• Q2 margin contracted, H1 improved: Q2 EBITDA margin fell to 10.42% from 10.88% YoY, while H1 margin improved to 10.83% from 10.69%; metal price fluctuations impact individual quarters and get adjusted in subsequent ones.
• Raw material consumption ticked up: Volatility in metal prices caused a 0.5% to 1% increase in raw material consumption vs the prior quarter; averaged over six months, there is no impact.
• Finance costs rose sharply: Finance cost increased to ₹27.49 cr from ₹16.47 cr, with financial charges as a percentage of net sales rising to 2.63% from 0.44%, driven by higher borrowings.
• Channel margin differential is small: Management stated margins are broadly similar across channels, then clarified a ~0.5% difference exists between export/dealer-distributor and domestic institutional sales.
• Full-year margin guided at 10.5% to 11%: The company expects to hold this range for the full financial year.

Balance Sheet & Capital Allocation

• QIP rationale is debt avoidance, not distress: The ₹2,000 cr raise fully funds Sanand, preserving the debt-free balance sheet; management argued that taking term debt would add interest and repayment risk that would crowd out future investment.
• Rating upgrade validates the posture: CARE upgraded the long-term rating to AA+; long-term ratings from India Rating and Research and ICRA stand at AA, with short-term ratings at A1+ across all three agencies.
• Working capital targets set: Receivables are expected to reduce from 2.25 months to 2.1 months this financial year; inventory, currently at 2.4 months due to the capacity increase, should normalize to the 2.25-month target by Q3.
• Promoter holding increase hinted, not committed: When asked about the MD’s TV interview comment, management clarified the reference was to increasing promoter holding, not a buyback, and said only that “after a few months, we will look at it.”

Rajeev Gupta: "We want to run a debt-free company. As we have earlier spoken for that also. So the same guidance for future also because we want to run the debt-free company, that's why this fundraising option came into the picture."

Demand Backdrop

• End-market demand is broad and deep: Management cited strong demand across solar renewable energy, wind, the transmission sector (backed by a ₹9 lakh cr government evacuation plan over 6 years), thermal power projects, pump storage projects, tunnelling/highways/railways, and data centres.
• The company taps all opportunities: While energy sectors are the focus, KEI reaches the market through channel partners and its sales team rather than concentrating on any single vertical.

Guidance & Commitments

Key Metrics