KEI Industries Ltd Q4 FY2025 Concall Summary

Key Takeaways

• Export and B2C surge, EHV drags margin: Export grew 92% YoY and B2C distribution grew 42%, but a 48% drop in EHV cable sales shaved ~0.5% off EBITDA margin for the quarter.
• Growth guidance anchored to capacity, not demand: Management committed to 18% growth in FY26 and "upwards of 20%" from FY27, driven entirely by new capacity coming online rather than any demand forecast.
• Margin improvement is a FY28 story: EBITDA margin will stay range-bound at 10.5%–11% through FY27; the 0.5%–1% improvement from Sanand's economies of scale only begins in FY27-28.
• Working capital optics are temporary: Operating cash flow looks weak because the company is paying suppliers early with excess cash; payables will normalize once Sanand capacity starts operating.
• What to watch next quarter: Whether Sanand Phase 1 commercial production begins on schedule (end-Q1 FY26), the pace of EHV order book conversion given the ₹603 crore backlog, and any tariff-driven shift in export order flow once the US situation settles in 2–3 months.

Growth Drivers & Demand Environment

• Export breakout: Export grew ~92% in Q4, driven by consistent orders from consistent customers across multiple geographies, not a single large order. Management declined to set a US-specific target, stating capacity will be allocated wherever orders come from across 60+ countries.
• B2C distribution scaling fast: Sales through the dealer-distributor network grew 42% in Q4, crossing the 50% share milestone (target was 48%). Expansion continues in Eastern and Southern India, with the North and West already strong.
• Wire & cable volume: Volume growth in the cable division, measured by metal consumption, was approximately 21% in Q4 and 20% for the full year. The segment grew ~35% YoY in value terms with improved profitability.
• Sector tailwinds: Solar power projects are the most significant growth driver, followed by coal, transmission, data centers, EVs, infrastructure (railways, metros, highways), and new manufacturing plants. Power sector growth is outpacing other verticals.
• Competitive landscape: Management sees no major impact from new aggressive competitors entering with large capex, citing strong industry momentum. On Chinese competition, the company does not face it in tailor-made products built to international specifications with specified approvals.

Anil Gupta: "Wherever tailor-made products are manufactured as per the international specification, and with the specified approvals, we don't face competition from Chinese companies."

EHV Segment: The Drag & The Recovery

• Q4 execution collapse: EHV cable sales fell 48% YoY (₹115 crore vs ₹220 crore) because some orders could not be executed due to right-of-way (ROW) issues. EPC sales excluding cable also declined 63% to ₹72 crore.
• Margin penalty: The lower EHV sale directly reduced company operating margin by approximately 0.5% in Q4. Management expects this 0.5% to be recovered in the current year as EHV capacity runs full.
• Recovery already in place: The EHV order book stands at ₹603 crore, and management stated recovery has already happened. Full 100% capacity utilization is expected in FY26.
• Sanand EHV timeline: Phase 2 of the Sanand project, which includes EHV capacity, will be completed by March 2026, meaning production from that new capacity only begins in FY27.

Sanand Expansion & Capacity-Led Growth Thesis

• Phase 1 imminent: Commercial production of low-tension and HT cables at Sanand will commence by end of Q1 FY26. The total project will be completed by end of FY26.
• Brownfield complete: Capacity additions at Chinchpada and Pathredi for wire and power cables were completed in FY25.
• Utilization ramp: Management expects it will take approximately three financial years to reach 70%–80% capacity utilization at Sanand. The primary objective is to fill capacity regardless of which channel or geography the volume flows through.
• Growth is capacity-driven, not demand-forecasted: The 18% FY26 growth commitment is explicitly tied to capacity addition, not a demand outlook. Management stated "we will be growing 18% because we are adding capacity," and that it does not matter whether volume comes from exports, dealers, or domestic institutions.
• Market share ambition: Substantial market share gains are expected only from FY27 onward, when significant new capacity becomes available.

Rajeev Gupta: "It does not matter to us whether it is coming from export, it is coming from dealer, distributor, or it is coming from the domestic institution. Ultimately, we have to utilize the capacity so, that is our main object."

Margins: Range-Bound Now, Relief Later

• Current range: EBITDA margin will remain at 10.5%–11%, with no improvement expected in FY26 or FY27. Management was explicit: margin improvement is not part of the near-term story.
• Gross margin optics: Gross margin drifted from 25% to 23.5% because higher copper prices inflate revenue, making percentage margins appear lower. Management reiterated that operating/EBITDA margin is the key metric to track.
• The FY28 inflection: EBITDA margin improvement of 0.5%–1% will begin only from FY27-28, driven by economies of scale from the Sanand facility, not from selling price increases.
• Pass-through model: The company works on a pass-through basis for raw materials, so it neither gains nor loses from copper or other commodity price movements. No inventory gains or losses to model.

Rajeev Gupta: "Whatever EBITDA margin we are having, we will be working in this range only."

Working Capital & Cash Flow

• Payables anomaly: Operating cash flow appears suppressed because the company is paying suppliers faster using excess cash on hand. Payables reduced substantially even though sales increased 20%, as purchases were made through cash rather than credit.
• Economics of early payment: The interest saved by avoiding 90-day letter-of-credit costs is roughly equivalent to FD returns of 6.5%, so the trade-off is broadly neutral from a returns perspective.
• Normalization ahead: Payables will normalize once Sanand capacity starts operating and the company's cash deployment shifts toward the expansion. No specific timeline was given.
• Channel financing benefit: 70% of dealer-distributor sales are now covered through channel financing, which reduces receivable days. The cash discount offered for channel finance is netted off in gross margins.

Guidance & Commitments

Key Metrics