Ladies and gentlemen, good day, and welcome to KEI Industries Limited Q4 FY 2022 earnings conference call hosted by Monarch Networth Capital Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Rahul Dani from Monarch Networth Capital. Thank you, and over to you, Mr. Dani.
Thank you, Neeraj. Good afternoon, everyone. We are pleased to host the senior management team of KEI Industries today. We have with us Mr. Anil Gupta, Chairman and Managing Director of the company, and Mr. Rajeev Gupta, CFO of the company. Let us start this call with the management's initial comments followed by Q&A. Over to you, Anil, sir.
Yeah. Good afternoon, everybody.
Good afternoon. I'm Anil Gupta and joining me, Rajeev Gupta, director of finance. Warm welcome to all of you on this conference call. I'll give you a brief about this performance in the Q4 and then followed by yearly achievement. In Q4, the company has achieved a net sales of INR 1,791.7 crore against INR 1,246 crore last year. The growth in the net sales is 43.76%. Company has achieved highest ever quarterly sales in this quarter. EBITDA achieved is INR 179.7 crore against INR 140 crore last year in the Q4. Growth is around 28.45%.
EBITDA/net sales margin is 10.03% as against 11.23% in the same period previous year. EBITDA margin declined mainly because of some expenses normalized back to pre-COVID level and sharp fluctuations in input costs as well as in case of export orders, the sea freight. Profit after tax this quarter is INR 1,115.88 crore against INR 86.1 crore last year. Growth in the PAT is 34.57%. Company has achieved highest ever quarterly PAT during this quarter. Profit after tax/net sales margin is 6.47% against 6.91% last year's same period. The domestic institutional wire and cable sales through direct sales B2B is grown by 47%, in this quarter.
Domestic institutional extra high voltage cable sales is INR 146 crore. Growth is approximately 103% compared to last year. Export sales in this quarter is INR 177 crore against INR 126 crore. Growth is approximately 40%. The total cable institutional sale contributed for 53% in Q4 against last year same period, 50%. Sales through dealer network in this Q4 is INR 717 crore in Q4 against INR 464 crore last year. Growth is approximately 55%. From the beginning of the year 2021, company has been working on strengthening its dealer and distribution network and has recruited more than 150 additional marketing people from product background at different levels pan-India basis, resulting into good growth in the dealer and distribution segment.
We expect further boost in this, as the active working professionals all over India in the marketing are now established, and we expect better results this year as well. The total active dealers of the company as on 31 March 2022 was approximately 1,805. The total sales contributed through dealer network out of the total sales of the company is 40% through the B2C segment. I will mention that in this quarter we have grown in volume terms also by 19.7%.
In cable division.
In wire and cable division. Out of that, the sales from EPC department other than cable is INR 109 crore as against previous year INR 133 crore. Decline is approximately 18% in Q4 . Out of the total sales of EPC, the sales of other EPC is INR 37 crore. The sales of stainless steel wires in Q4 in 2021-22 is INR 61 crore against INR 45 crore in the same quarter last year. Growth is approximately 34%. Now I come to the results summary for the full year of financial year 2021-22. The total net sales achieved is INR 5,726.55 crore against INR 4,181 crore in the last year. Growth in the net sales is approximately 37%.
EBITDA in financial year 2021-22 is INR 603.57 crore against INR 475.5 crore. The growth in EBITDA is around 27%. EBITDA/net sales margin is 10.54% as against 11.37% in the previous year. The profit after tax during the year is 376 crore against INR 269.5 crore last year. Growth in the PAT is 39.5%. Profit after tax versus net sales margin has improved to 6.45% last year. The domestic institutional wire and cable sale contributed and improved by 33% as against 30% last year.
The total extra high voltage cable sale is INR 52 crore against INR 418 crore in the previous year. Growth is at approximately 23%. Export sales in 2021-22 is INR 585 crore against INR 608 crore. The decline is approximately 44%. Export contributes approximately 10%, out of which cable contributes 7%, EPC 1%, and stainless steel wire 2% as against 14.5% last year. Sales through dealer networks, that is B2C sale, achieved is INR 2,239 crore as against INR 1,408 crore. Growth in this segment is 65% compared to last year. The sales through dealer network has contributed 40% of the total turnover against 34% last year.
Now, the sales of EPC department other than cable is INR 380 crore against previous year INR 466 crore. Decline is around 18%. This is in line with our previous guidance to lower EPC business and restrict it to 10%-12% of the total revenue. EPC contributes, contributed INR approximately 7. Out of the total sales of EPC, EHV extra high voltage cable EPC execution portion is INR 128 crore as against INR 105 crore last year. Stainless steel wire sale in financial year 2021-22 totally contributed INR 226 crore against INR 140 crore last year. The growth achieved is 61% over a full year period. The pending order position as on is approximately INR 2,419 crore.
Out of which the EPC order spending are INR 959 crore, which includes ADB-funded turnkey project in Nepal, INR 202 crore, and Gambia, which is again a World Bank-funded project, is INR 410 crore. Incidentally, we have not booked any new EPC orders in the last financial year from the domestic market. However, we did book the turnkey orders, project orders of extra high voltage cable, wherein the 80% of the value of the order is only cables, which is manufactured by us, and the execution portion is very small.
The pending order position of extra high voltage cable is INR 224 crore and domestic cables INR 1,100 crore and export order pending is INR 137 crore. The total is INR 2,419 crore. Besides that, we are L1 in orders of approximately INR 61 crore in extra high voltage cables. The company's credit rating from ICRA, CARE, and India Ratings and Research is AA- for long-term bank facilities and A1+ for short-term bank facilities. The book value per equity share of the company is INR 236.98 as on March 31, 2022, as against INR 197.83 as on March 31, 2021. The company's net debt including acceptances is INR 270 crore as of, as against three...
As on 31st March 2022, as against INR 408 crore as on 31st March 2021. It was INR 922 crore as on 31st March 2021. During financial year 2021-22, finance costs has decreased to INR 40.39 crore against INR 57.31 crore in the previous year same period. Percentage of financial charges on net sales has decreased to 0.71% from 1.37%. Now I'll give you a brief about the future outlook. Our strategy is to increase continuously retail sale and through our B2C segment. Downsizing EPC business is working well. In future, within two years' time, our retail sales will reach at least 50% of the total sales of the company with annual growth of 30%-35% per annum in the retail business.
The retail business offers superior growth prospects with better margins and lower working capital requirements. The capacity utilized during FY 2021-22 is 76% in cable division, 59% in house wire division, and 84% in stainless steel wire division. The company already has capacity in place to achieve growth for the current financial year. Company is in the process to expand the capacity by setting up a greenfield project for low tension, high tension and extra high voltage cable with an investment of approximately INR 800 crores staggered over 3-4 years to maintain a growth of 17%-18% CAGR in the coming years.
For last 15 years, we have achieved a CAGR growth of approximately 15%, and in last 5 years the CAGR is 20%, except 2021 due to the COVID. Overall, company is targeting approximately 18%-20% growth in the current year with strong order book in hand and good inquiry pipeline and good demand from government and private CapEx. By increasing our footprint through our dealer network. The demand drivers and the industry outlook. We see a robust demand, government CapEx and infra spending, especially from oil and gas sector, refineries expansion and fuel upgradation projects, solar power projects and tunneling and ventilation projects in highways as well as railways. Similarly, the metro rail projects, et cetera.
In the private side, the sector side, strong CapEx is seen in solar power projects, real estate projects, and in the. We see a strong industrial demand due to this PLI schemes given by the government. We are seeing revival of CapEx in, especially in steel, cement and many other miscellaneous industries. With this brief, I thank you very much for your request and invite you to ask any questions, whatever you need. Thank you.
Thank you very much. We'll now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants, you may press star and one to ask a question. The first question is from the line of Mahavir Jain from Ambit Capital. Please go ahead.
Hi. Thanks for the opening remarks. My first question is on the order book breakup. I'm really sorry, I couldn't get it. Can you repeat it?
Total order book is INR 2,419 crore, out of which EPC order is close to INR 959 crore. Extra high voltage power cable is INR 224 crore, plus the INR 61 crore is the L1 order. The domestic cable order book position is close to INR 1,100 crore and export order book position is INR 137 crore.
Thanks, sir. My second question is on the margin guidance. Since we are seeing a high cost inflation in terms of material prices, any guidance on that? Any sense on that?
Margin we are able to maintain close to 10.5%-11% range. It's all depending on the input pressure, but we are in the range.
Last question on the electrical goods side. Any sense on that?
At present we are strengthening our dealer distributor network and, for that, from the last financial year, last quarter, we have engaged one retail sales head also, who is taking care and that background is from the switchgear. At least for another six months we will further strengthening our dealer distributor network because we want to grow further from here. Already we have reached close to 40%. Our target to reach 45%-47% contribution from dealer distributor network in this current financial year. When we will be reaching to that level, then we will be adding slowly one or two products in a year.
For now, switchgear is the prime product?
Yes, not for now. It will be at least after six months.
Okay. Thanks for that, sir.
Thank you. The next question is from the line of Prakash Goel from ICICI Prudential Asset Management. Please go ahead.
Thank you for the opportunity, sir. I just want to understand why there has been a change in accounting method with respect to inventory.
Basically, the ERP does not support the FIFO method. In FIFO we need to calculate them manually, actually. Because of that, the ERP supports only moving average. All the big companies are now having only the inventory method through moving average. We have also shifted to moving average.
Which ERP system is this, sir?
Yes, yes.
BAAN.
That is a Baan. Now Infor.
Okay, I'll take it probably. I just wanted to understand what is the impact of this.
Impact has already been disclosed in the result notes.
No, no. Not for the previous year. For this quarter, how much profit has been understated because of shifting?
No, that is a very small amount. That is already written there. The table is there, actually.
Please go ahead.
Hello. No, no. That's what I wanted to understand as to why the accounting,
It is.
Basically to automate.
For us to automate and bring the inventory calculations on the ERP. Because the ERP system was not, you know, supporting, you know, FIFO method.
Majority of the companies we track are on FIFO, and I suppose SAP supports FIFO. I'll take it offline, sir, to understand in greater detail.
No, we have the Baan. Now most of the companies, whether you talk of Havells or other companies, they have already moved to moving average.
Okay, sir. Thank you. Thank you, sir. That's all from my side.
Moving average is more scientific, actually.
No, that's true. What happens, like, you know, the advantage of changing these besides the
No, it is not an advantage. It is just automation, actually.
Understood.
Because we want to automate also, sir.
Thank you. That's all from my side. Thank you. All the best, sir.
Thank you. The next question is from the line of Naval Seth from Emkay Global. Please go ahead.
Yeah, thank you for the opportunity, sir. A couple of questions. If you can, you know, highlight what is the status of capacity expansion plan? You know, has the land been totally procured now, so by when it will be operational?
Almost 35% land has already been registered, and every week few registries are going on. Earlier we were thinking that by thirty-first of May we will acquire complete land, but at present it seems that at least 2 months will take place to acquire the land. Because it's a 100-acre land, so we have already registered 30% now.
Okay. Basically it will be operationalized only by end of FY 2024. Is that fair assumption?
Yes, yes. In Q3 of 2024.
Okay. Sir, CapEx, what you have stated is INR 800 crore over 3 years. FY24, FY23 CapEx, any guidance on that?
2022-23 CapEx will be in the range of INR 150 crore-INR 200 crore.
This will include land cost?
No, land cost then it will be INR 200 crore.
Okay. In terms of order book, the same has kind of dipped, you know, on sequential basis, marginally grown on YoY basis. You know, what has been the reason for the shortfall? Are we back on track in April? How you are sensing 1Q over there?
In the order book, the normal low tension, high tension power cable, that order book is mainly in the range of INR 1,100 crore-INR 1,300 crore range. In extra high voltage power cable, sometimes it may go up to INR 400 crore. At present it is close to INR 300 crore. Once one order comes, it's almost INR 100 crore-INR 150 crore single order.
Actually, the earlier our order book position used to be in the range of INR 3,000 crore approximately in last 3-4 years. It was mainly because of the EPC orders. Since we have reduced the EPC business, that is the reason that order book looks lesser. Because we are normally executing orders maximum within 3-4 months. Secondly, in the B2C side of the business, which is constituting now 40%, there is practically no order booking. The order comes and dispatched from the stocks. It is a sort of an instant order and instant sale.
Okay.
I hope I'm clear.
Yeah, yeah. You are clear over here. In terms of receivables, so last year, FY 2022, we would have got INR 150 crores as retention money from government. So the similar amount can be expected this year also?
Yeah, this year additional 125 crore will come. Last year, we received more than 150 crore. This year another 125 crore will come.
Okay.
Our receivable has already gone down from 3.87 months to 2.9 months.
Which has been your target, 2.9 months and it will sustain over here. Is it sustainable?
Yeah, it will reduce further from 2.9 to our target to reach 2.5 months.
And because of-
Because our retail sales are increasing, so it will be in the range of 2.5.
Sir, 2.5 will be achieved in FY 2023 or, you know, will take a year.
It will be trying in 2023.
Okay. In the past, sir, because we had stated, as our focus is high on retail distribution and, you know, retail revenues, which will also be margin accretive, going forward. Because of the commodity inflation and because of the logistics cost increase, so the margin increase guidance, so how we should look at it, has that got now postponed to FY 2024, or we will still see some benefit coming in in the current financial year?
See, earlier also we were in the range of 10.5%-11% and last year we achieved 11%. In 2021-2022, we achieved 10.5%, mainly because of the inflation in the input cost. Once they settle in this current financial year, we will again be going towards 11%.
If I remember, in between there was some guidance of 100+ basis point expansion because of that retail sales. That would be then in FY 2024 once everything settles down.
Yeah, once everything settles down. Due to increase in retail and the increase in the pricing from the next year, as earlier spoke, that from the next year onward we will be improving our pricing once we are at a 50% contribution level. It will further strengthening our EBITDA margin by point 0.25 to point 0.5 basis point each and every year.
Understood. Last question on volume. Can you provide volume details for house wire segment in 4Q? What is your expectation of that 18%-19% revenue guidance growth, if you can bifurcate that within the segments for FY 2023.
See, last year our volume growth was close to 21% as a whole. Wherein the last quarter was 19.7%. As a whole for full year, our in the whole wire and cable division, we have grown by 21% volume.
Thank you. Now I'll request you to come back in the question queue for a follow-up question. The next question is from the line of Manoj from ICICI Securities. Please go ahead.
Thanks, sir. Most of the questions have been answered. One thing I would like to understand is what would be the strategy or the mindset behind the new categories that we are trying to venture into over the next six months. Like, what would be the overall thought process apart from building strong distribution networks? Because that would be one of the key driver. Other than that, what would be the thought process, what would be the other initiatives, and how we target to scale this business over the next two to three years?
At the moment, you know, we'll be able to give you some guidance about the new products, maybe after six months. At the moment we are strengthening our network for improving our sales of house wires and cables. We will gradually take a call on which segment to go about. The prime purpose will be to utilize the same dealers and manpower to sell some additional products. We'll be able to really give some, you know, this idea maybe after six months.
Sure, sir. Overall, like, if you look at now for several years, we have been doing extremely well in the house wire segment. Eventually, if you look at the B2C business has been doing extremely strong. Now, in fact, even in the current period, what I understand that you have definitely done better than industry in the house wire segment. What's leading to this strong growth, this continuous growth, and what's influencing your channel partners to stock more of KEI products, replace some other brands? What's happening at the ground level? That would be very helpful, sir.
You see, I'll state it like this. Since our base was low as compared to others, what we did was first improved our branding. Secondly, increased our reach to the areas where we were not present, where we had no marketing team or we didn't have the dealers. We tapped those areas. You know, did micro-level planning about towns and districts and you know pushed the key dealer incentive and influencer schemes to get some more market share. We are still, I mean, comparatively far behind the other players like Havells or Polycab in the wire segment. There is still a lot of room exists to grow in this area.
Right, sir. I completely agree to that. My question would be just follow up on this. Like, how would the gross margins differ for house wires as compared to other brands, like Havells or probably Polycab?
In our case, the EBITDA margin is close to 11% in the wiring segment, or maybe plus. In the institutional sale, our EBITDA margin is close to 10%-10.5%, and in export is also in the 11% range. That was earlier also communicated to you. After the current financial year, once we will be reaching towards 50% sale contribution through dealer distributor, then pricing will be, the gap of the price between the top players and the-
We will be basically narrowing down in the coming years.
Right, sir. One last question, if I may squeeze in. On the margin side, Q3, we had highlighted like there were some low price orders that we had executed, especially in the EHV side, and we were confident that probably Q4 won't take a major hit. In fact, sequentially, what we have seen is, gross margins have declined. Probably FY 2023 largely when you are talking about margin improvement on YOY basis, that would be led by product mix or, whether there would be some normalization in pricing strategy, and how do you see it?
Manoj, we work as a company as a whole, sometimes even in spite of the input cost rising, but we increase our sale or we were able to increase our sale in Q4 , so there the expenses percentage versus sale has gone down, and we were able to maintain the EBITDA as well as that. The whole year also, because of the lower interest cost, we were able to maintain our PAT percentage as compared to last year was also higher.
Right.
That is basically the management efficiency wherein if we are losing at some front, then we are gaining at another front. In future also you will see. That's why we generally communicate the EBITDA margin is close to 10.5%-11% range. We are trying to maintain almost PAT level close to 6.5% range now.
Right, sir. This was very helpful. Thanks a lot, and wish you all the best, sir.
Yeah. Thank you, Manoj.
Thank you. The next question is from the line of Rahul Aggarwal from InCred Capital. Please go ahead.
Hi. Good afternoon, sir, and congratulations for a great chat. I think actuals continue to beat the guidance given at the start of the year. Sir, firstly, there was a revised filing of results on the stock exchange. I just saw 5 minutes back before the start of this call. Any material change?
No, just one figure was actually not able to read properly, creditors. That was figure of 600-something, but it was showing by assuming it was INR 850 crore. That's why we have revised and submitted. It was pointed out by Mr. Amit Mahawar of Edelweiss Securities.
Got it, sir. Got it.
Otherwise the numbers are same, the same chart. There was a scanning mistake was there only.
Got it, sir. Moving on to questions. On the category-wise peak revenue, you know, obviously understand the guidance and Anilji mentioned that capacity is in place to meet INR 6,600 crore top line next year. But broadly, if I look at the full year performance for LTHT, EHV, housing and stainless steel, and I'm also assuming there has been some capacity expansion happened during the year also. There are some volume number available in terms of, you know, these capacities. Let's say for example, EHV is somewhere about 900 km, LT cable are about 1.2 lakh km. Housing wire, you know, almost like 1.2 million km. Stainless steel was about 7,200 tons.
Could you help me understand by March 2022, are there any changes, material changes within this segment in terms of capacity? What is the peak revenue possible you know, through this segment? Not connecting it to the guidance.
Yeah, yeah. Around peak revenue with this capacity available with us, we can reach out to INR 6,800 crore-INR 7,200 crore. Because already as Anilji had communicated in the cable division, we have utilized 76%, so almost more than 20% capacity there is. Housewire since we have set up a new plant in 2019, so almost 60% capacity we are utilizing, so almost 40% capacity idle for housewire. But for extra high voltage power cable, we are already utilizing 95% capacity, so there is not much scope.
We are definitely working every year and doing debottlenecking process. By debottlenecking process and efficient improvements, we are able to improve our capacities from the same plant by 5%. This year also we'll be working on in terms of some changes in the replacement of some machinery and debottlenecking process, which will further jack up the capacity to 5%-7% extent.
Sir, fair to say that EHV
That is a 20-year cost.
Got it, sir. Sir, fair to say EHV full year should be like INR 600 crore run rate and housing wire at about INR 800 crore run rate. Fair to say that?
Yes.
Yes. Okay, got it. Sir, second question was essentially on the margin. Now a lot has been discussed around it, but the way we analysts understand that generally it's a pass-through in cable and wire segment because pretty straightforward, relatively smoother versus other electrical products.
Yes.
Purely because it's related to copper and aluminum. Now if I look at gross margins, and the way I'm calculating it is basically sales minus raw material cost, there are historical lows for KEI at 24%. You know, the long term average has been like 30% for last six, seven years. Could I really understand why is this happening even though we are trying to pass it-
No, because.
What has to happen to take it back?
I will explain how. First of all, we have reduced our EPC sale. In our EPC sale, we were almost supplying 25%-35% of the cable, where the cable margin was much, much higher. Now we have reduced EPC sale, so the average percentage of gross margin has gone down because of that, number one. Number two, the input cost has roughly fluctuated in the last financial year. Because of that, there is a lag effect of 15 days in the retail market, because in every 15 days we are revising the list price. Mostly we are having 3-4 months a pending order position, but we are having 2.5-3 months inventory. Almost 25-30 days lag effect is there in the institutional side.
Because of that, because last year the prices were going only in the one direction. If they were going up and down, then it is average out. Because of that impact was there. We have make up that because of high sales volume in the Q4 as well as the whole year. Because of that, we were able to maintain the EBITDA as well as the CapEx.
Should I assume that gross margins ever go back to 30% because one is-
We are not working for gross margin. We are working for EBITDA level because sometimes aluminum cable is business we are selling, sometimes copper cable we are selling. EBITDA margin will be in the range of 10.5%-11%, and our CapEx margin will be closer to the 6.5%.
Done, sir. Best wishes to you ahead for fiscal 2023. Thank you so much for answering my questions.
Yeah. Thank you, Rahul. As you have seen the last five years, you will see the sustainable growth in the next five year also.
Awesome.
Thank you. Next question is from the line of Shrinidhi Karlekar from HSBC. Please go ahead.
Yeah, hi. Thank you for the opportunity and congratulations on good set of numbers, both P&L and balance sheet. So would it be possible to give some more color on your growth guidance of 18%-20%? What really driving this strong guidance, particularly given copper prices we are seeing softening and probably, growth has to be driven much more by volume rather than price.
I have already mentioned that there's a good pipeline of inquiries from government infra spending, especially in the railways, metro rail, tunnel ventilation projects, oil and gas sector like refineries upgrading in terms of fuel upgrading projects as well as expansion, capacity expansion projects, and private CapEx also, including real estate and the construction sector. That gives us the confidence and what inquiries are in hand, what orders we are booking every month, that gives us the confidence of you know the growth which we are projecting. I can say that our monthly order intake, new order intake is in line with our projections what we are giving to you. As far as copper prices are softening, we can't say that how much it has softened.
These are temporary fluctuations and we are more driven by the volumes. If we are able to improve the volumes, we are more satisfied than just growing due to the cost of input range.
Srini, as you have seen the last year also, we have grown the volume terms close to 21%. Whatever capacity we are having, at least 18% volume terms we can grow. Prices we cannot control, but at least volume terms we will be definitely growing close to 18%.
Okay. Good to hear that, sir. Sir, with company turning net cash, can investors expect increased dividend payout ratios in coming years?
Because we are into expansion, every year we need to spend around INR 200-INR 250 crore, and we are reducing our financial cost by way of the cash purchases. Little bit increase every year we are doing in the, in terms of the dividend payout. In future also that kind of increase will be there.
Okay. One last bookkeeping question, sir. Out of INR 2,300 odd revenue through dealer distribution network, can you bifurcate that between house wire and HT/LT cables?
Definitely. The dealer distributor division close to INR 1,284 crore of the buyer.
Okay.
Balance, INR 1,033 crore of the HT/LT. Two dealer distributors.
Okay. Thank you, sir. Those were my questions. All the very best for future.
Thank you, sir.
Thank you.
Thank you. The next question is from the line of Harshit Kapadia from Elara Capital. Please go ahead.
Yeah. Thank you for the opportunity and congratulations.
Harshit.
Yeah. Yeah. Is this okay, sir?
Uh-huh,
Yeah. Congratulations first of all for a very good set of numbers. Just wanted to check, you know, we have seen the inflation and the commodity prices continuously rising. Is there some softness in demand which you have seen in the month of April or part of May? If you can highlight, that would be helpful.
No.
You know, we have not seen any softening of demand. It is basically only deferment of purchases by 15, 20, 2-3 weeks by the customers because of the very high LME of aluminum, copper and even steel. The demand has not gone anywhere. It is there. We are seeing a very good order booking, yeah, now because the markets have softened, prices have softened, and we have seen a very good booking now at the moment.
Okay, that's good. Secondly, sir, what we have seen, you know, looking at yours as well as your competitor results it looks like people are chasing, as in companies are chasing market share rather than taking the adequate price increase to offset the inflation. So how much more price hike is required to reach, you know, KEI to reach to a 10.5% EBITDA margin level? Right now we are at 9.6%.
That 9.6% is basically the institutional orders which wherein at least one month lag effect is there. Now if the prices are settled, so then again the margin will be in the range of 10.5%-11%.
So far as price hike is concerned, I think whatever price hikes were to be done due to input cost increases have already been done, and now no more price hikes are needed, at least for our industry, unless the LME goes up further.
Understood, sir. Any color you can give us on the export portfolio, sir? Because we have been trying to get into new countries. Right now we are at INR 400 crores and you are looking to, you know, raise it to, let's say INR 700+ crores. Any strategy on this would be helpful, sir.
First, we are focusing on increasing the sales in the existing countries of exports. We are working on you know, certifications in some more countries and forming teams, you know, exposing ourselves to more and more international exhibitions since they have started to get more network events and networking in some new countries like South America, North America, and similarly some African countries also. It will yield dividend. For last two years, our exports were stagnant, mainly because there was no traveling anywhere by our export teams.
Understood. How much could be the number, any suggestion you can have for FY 2023 in terms of export?
At least 12%-15% growth will be there in export also.
Okay, that is good to hear. Sir, just a follow-up question to Rajiv. Sir, is it possible you share the interest cost break-up for FY 20, FY 22?
Yeah, yeah. Please note down. Interest on term loan was INR 1.97 crore. Working capital interest was close to INR 20 crore. LC interest cost was very less, INR 0.57 crore. Bank charges on LC was INR 0.63 crore. Bank charges on bank guarantee was INR 10.6 crore. Processing charges at all was INR 6.39 crore. So it put together INR 40.39 crore.
Very nice, sir. Just final question. With this new product that you will be launching in switchgear, you will be having a separate team?
No, new product launching is just after 6 months because we are focusing only and only on the house wire and improving our dealer distributor network and the sales to the level of 50% because in the existing we can make the profit. For any new product, we cannot make profit at least for 5 years.
There would be a separate team would be there for this or?
No, no. The same team. Those who are catering, we have already divided our dealer distributor team in two parts. One is taking care of consumer and another taking care of the dealer distributor, those who are working for the projects.
Very nice, sir. This was really helpful and all the best for the future. Thank you.
Thank you. The next question is from the line of Nikunj Gala from Sundaram Asset Management. Please go ahead.
Hello? Yes, Nikunj.
Hello.
Hello, hello.
Audible, sir?
Yes, yes, audible.
Yeah, yeah. Sorry for that. Sir, is it possible to give us, you know, copper volume consumed in the FY 22 versus say FY 20 or FY 19?
I will give you.
Okay.
FY 22 versus FY 21 I can give you right now.
Sure.
Just a minute. Copper consumption, copper means copper and aluminum both because the conductor is either copper or aluminum. Financial year 2022 we have consumed 67,978 metric tons as against 2021, 56,107 in the previous year. Almost growth is 91%.
Yeah. Okay. If possible, I'll, you know, take the FY 2019 volume also. Just second-
I am not having this right now, but if you call I'll give you that.
Yeah, sure. No problem. Yeah. Secondly, is it possible to just help us in the understanding of working capital going forward? Is there any, you know, liquidity concern you are seeing in the market or what kind of a level you are comfortable with?
No. You see our receivable cycle has already gone down. Our inventory was 2.19 months last year, which in 2022 is almost same, 2.26 months. Our debtor has already gone down from 3.87 months to 2.92 months. Our creditor is depending on the cash available we are having. This year we were having sufficient cash, so we have-
Yeah.
Gone for the cash purchase and the creditor holding was only 1.6 month as against 2.13 month.
Right. I'm saying, in a sustainable basis, what is the number of days you are working with?
Our working capital cycle is at present 3.41 months because
Yeah.
Sir, we are unable to hear you.
Hello?
Go down to less than three months.
Sir, sorry to interrupt you. We lost your audio. May I request you to repeat the answer one second, please.
Hello. Are you hearing me?
Yes, sir. Now we can hear you fine.
Yeah. At present, as per the balance sheet, our working capital cycle is 3.41 months, wherein the creditor is only 1.6 months. Normally, creditor is close to 2.5 months.
Sure.
If we consider that, then the working capital cycle is already less than three months.
Okay. That is a sustainable, you know, one can assume in going forward also, right?
You see, the receivable and inventory is sustainable. As I said, we are targeting 2.5 months in this financial year, and the inventory will be in the range of 2.25 months. Creditor, again, depending on the cash we are having in hand.
Okay, sure. Okay, thank you, sir.
Because we are getting benefit on the cash purchase.
Right. Okay. Thank you.
Thank you. Participants, you may press star and one to ask a question. The next question is from line of Harsh Shah from Jefferies India. Please go ahead. Oh, yeah. Thank you. Actually, my question has been answered. Thank you very much. Participants, you may press star and one to ask a question. The next question is from the line of Rahul Aggarwal from InCred Capital. Please go ahead.
Thanks for the follow-up. Just one question. You said the new plant will, you know, start in phases sometime in 3Q of fiscal 2024. Is that correct?
Yes, sir.
Sir, you know, the capacity, peak capacity you're talking about, INR 7,000 crore. I think you'll be very close to that number next year. First half of fiscal 2024, you know, nine months of fiscal 2024, we'll need some kinda capacity, right, to further grow from there. Any thoughts whether I'm doing this calculation right or?
No,Anil , has said.
Already mentioned that every year we are improving the capacities by 5%-7% in our existing plants by debottlenecking process. We will be having adequate capacity to cater to our requirements before our new plant comes up for production.
Sir, already Anuj has taken a decision to adding the capacity in our Chinchpada plant of house wire.
Got it, sir. That clarifies.
We are adding the capacity.
Thank you. The next question is from the line of Khadija Mantri from Sharekhan. Please go ahead.
Hello. Good afternoon, sir. Congratulations on good set of numbers. First of all, I would like to say that this volume and value market share in wires and cables, I understand that you are at a low market share as compared to Havells and Polycab. Can you just give a color on your market share, at least in the organized segment, and whether it has increased in the last year or in the last quarter gone by?
You see the market share in the wiring segment, our market share is close to 6%, house wire segment. In the institutional side, our cable market share is close to 12%-14%.
Okay. Sir, I want to understand more about the PLI scheme as some of the companies like Blue Star, they have said that it's going to be an incremental revenue. I just wanted to have your perspective on the same and how is it going to be accounted for in the future for the upcoming capacity?
See, from PLI scheme, it will be bringing in very heavy new CapEx by several companies in the private sector in the manufacturing of solar equipment, solar power equipment, batteries, mobile sets, white goods, you know, and many other equipment. They will be setting up new industries and the cables are required heavily when any new industry comes up. It gives a multiplier effect to the power needed as well as the industrial requirements in those projects.
Thank you. Ms. Mantri, you are requested to come back in the question queue for a follow-up question. The next question is from the line of Bob from Falcon. Please go ahead.
Yeah. Hello. You mentioned you have been growing sales.
Oh, sorry to interrupt you. Your voice is not very clear.
Okay. Am I audible now?
Slightly.
Hello. Yeah. You mentioned that you had been increasing your sales through increased dealer penetration, because you're starting off from a low base. When is that expected to level off? Because once you have dealers in most areas of the country, your growth should level off, shouldn't it?
No. I mean, that is what I was talking about of the house wire. Because our base has been low, it will take, I think, another three years to for us to reach to level off. How much it will level up, I cannot say because if we are growing, other companies will also strive to grow. Our aim is to grow, but not to compete and go in a rat race of others at how much market share we gain. We want a decent growth and a profitable growth. That is our aim.
I know. I understand that. My point was more that once you have a dealer in an area that has not been serviced before, there will be an initial spurt of growth, but after that there won't be much growth, correct? Because the dealer's already there.
There will be growth. There will be growth, but it will be maybe 20%. It may not be 50%. That's that will be the difference. That's all. Once we reach to a significant base.
Okay. That you're saying will take 2-3 years.
Yeah.
Okay.
You see the existing companies are also growing. You may be talking of Polycab, Havells. They are also still, they are having so many dealer distributions.
Significantly, markets are growing also.
If the market is growing, they are also growing.
Yeah, their growth rates are not as high as yours.
No, if the base is higher, then the percentage growth will be not to that kind.
Right. Yeah. That's what I meant actually, because your growth rates are now much higher than the industry growth rate.
Yes.
That's driven by the low base.
Yeah.
Once the base gets higher, then it'll obviously start coming down, correct? It'll be similar to the industry growth rate.
Yes, sir. After 3, 4 years.
Okay. All right. Thank you.
Thank you. The next question is from the line of Devang Patel from NAFA Asset Managers. Please go ahead.
Sir, had you not changed the accounting policy, what would our Q4 margins look like?
Future margins will be in the range of 10.5%-11%.
No, no. Had you not changed the accounting policy, what will be?
No, it is only INR 3-4 crore impact, not much impact of the inventory.
That was the impact for last year in FY 21, right?
FY 2022 also, no?
Okay. Given the whole 2023 impact for last year.
No, no. It is very minor impact because moving average says the average and the FIFO method says the first in, first out. It is not much, you see.
Okay. Sir, secondly, what is our revenue contribution from renewables?
From renewables?
Yes, renewable energy, solar.
We can answer it later on. Because same industry here, because whether it goes to solar, it goes to wind, it goes to the thermal, for us it is the power sector actually.
Yes, but you know, earlier call you mentioned that in solar much more DC cables are required.
We can quantify it and we'll let you know.
Okay, okay. That's all from my side. Thank you.
Thank you. The next question is from the line of Harsha from Jefferies India. Please go ahead.
Sir, is it possible to repeat the interest cost breakup, please?
Yeah, please note down.
Yeah.
Interest on term loan is INR 1.97 crore.
Okay.
Interest on working capital is INR 20 crore approximately. LC interest is INR 0.57 crore.
Okay.
Bank charges on LC is INR 0.63 crore. Bank charges on bank guarantee is INR 10.6 crore. Other processing charges that are to bank is INR 6.39 crore.
Okay. Thank you so much. Okay, thank you.
Thank you very much. Ladies and gentlemen, we'll take that as the last question. I now hand the conference over to the management for closing comments.
Thank you very much, I mean, colleagues for attending our, you know, conference call on the financial year 2021-2022 results. If you have still any other questions, please reach out to us. I really thank you for your support and trusting us. Thank you.
Thank you very much. On behalf of Monarch Networth Capital Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.