Ladies and gentlemen, good day and welcome to Q3 FY 2022 earnings conference call of KEI Industries Limited, 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. Anubhav Rawat from Monarch Networth Capital Limited. Thank you, and over to you, Mr. Rawat.
Thank you, Nirav. Good afternoon, everyone. I hope everyone is safe and healthy. We are pleased to host the senior management team of KEI Industries today, and 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 management's initial comments about the results, and then we can take your questions. Over to you, Anil, sir.
Thank you. Yeah, good afternoon, everybody, and welcome to this conference call. I'll give a brief about the Q3 results of KEI Industries. You have all these numbers with you now. I'll give a brief. Net sales of the company in Q3 is INR 1,563.85 crore. We have grown in net sales by 35.64% in this quarter year-on-year basis. The company has achieved highest ever quarterly sales in this quarter. EBITDA in this quarter is INR 158.54 crore. The growth in EBITDA compared to previous quarter year-on-year is 22.93%. EBITDA/net sales margin is 10.14% as against 11.19% in the same period previous year.
EBITDA margin declined mainly because of some expenses normalized back to pre-COVID level and sharp fluctuations in the input costs. Profit after tax this quarter is INR 101.25 crore against INR 76.15 crore in the same quarter previous year. Growth in the profit after tax is 32.96%. This company has achieved highest ever quarterly PAT during this quarter. PAT/net sales margin is 6.47% versus 6.6% last year same period. The company's domestic institutional wire and cable sale in this quarter is INR 480 crore and against INR 343 crore in the same quarter last year, the growth is approximately 40%. The growth in the institutional EHV cable sale is INR 183 crore.
Domestic institutional EHV cable sale is INR 183 crore. The growth in this segment is 18%. Export sale this quarter is INR 186 crore. The growth in this is around 34%. Out of this export sales, cables INR 139 crore, EPC INR 15 crore and stainless steel wire INR 32 crore. Total cable institutional sale contributed approximately 50%, 51% in third quarter against last year same period, 52%. Sales through dealer network, dealer and district distribution network achieved INR 634 crore in third quarter against INR 410 crore last year. Growth in this segment, sales through dealer network is 55%. From the beginning of year 2021, company has been working on strengthening its dealer and distribution network and is it.
Has recruited more than 150 manpower upfront in the marketing department from electrical and other FMEG, CG, EG background at different levels pan India, resulting into good growth in the B2C segment business. The total active working dealer of the company as on 31 December 2021 was approximately 1,700. Total contribution through dealer network is 41% of the total sale of the company in third quarter against last year same period it was 36%. The EPC sale other than cable is INR 93 crore against previous year INR 122 crore. Decline is approximately 24% in the third quarter. Out of the total sales of EPC, the sale of turnkey contribution from extra high voltage cable projects is INR 38 crore as against INR 30 crore last year same period.
The stainless steel wire sale in Q3 of FY 2022 is INR 65 crore against same quarter in the previous year, INR 41 crore. The growth is approximately 59%. Now I will give a brief of nine months summary. During nine months, the company achieved a sales of INR 3,935 crore, resulting into a growth of 34% in the nine months period. EBITDA achieved in nine months is 424 crore and the growth is 26.3%. Net sales margin, EBITDA, only net sales margin is 10.77% as against 11.43% in the same period previous year. Profit after tax in nine months is INR 260 crore, and the growth in PAT is 42%.
The PAT/net sales margin has improved to 6.62% versus 6.25% last year same period in the nine months period. The domestic institutional wire and cable sale has grown by 52%, and export sale, however, in the nine months period has declined by 15%. However, the total institutional cable sale in nine months has contributed 50% against nine months against last year 55%. Sales through dealer network is grown by 70% in nine months period as compared to last year in the last year nine months. As I mentioned that the sales through dealer network has contributed 41% in nine months against last year of 32%. The EPC sale has declined in nine months period by 19%.
This is in line with our previous guidance to lower EPC business and restrict it to approximately 10% of the total revenue. Stainless steel wire sale in nine months has grown by 74%. Now, the pending orders as on 31st December is INR 2,994 crore. In this, the EPC pending orders are INR 1,038 crore. EHV cable and EPC, extra high voltage cables, turnkey projects, INR 419 crore. Cable domestic business is INR 1,429 crore. Export cable orders pending are INR 108 crore.
Besides that, whatever sales we do through the dealer network, in that there is no pendency of orders because they are generally orders placed and then supplied from the stock, a ready stock. No order book is there for the B2C sale for wires and cables. The company's credit rating from ICRA, CARE and India Ratings 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 226.48 as on 31st December 2021, as against INR 197.38 as on 31st March 2021. Give me one minute. Borrowing and operating cash flows and finance cost.
Net debt, including LC acceptances, is INR 487 crore as on 31st December 2021, as against INR 407 crore as on 31st March 2021. However, it was INR 922 crore as on 31st March 2020. A substantial decline of around INR 450 crore from the financial FY 2020. During the nine months of FY 2021-22, finance cost has decreased to INR 30.34 crore as against INR 44.78 crore in the previous year same period. Percentage of financial charges on the net sales has decreased in this period to 0.77% from 1.53%.
The company has used operating cash flows for cash purchases resulting into reduction of trade payables, that means creditors, through LC, letter of credit acceptances, substantially by INR 243 crore as compared to March 2021, which has further reduced finance cost during the nine months. Though it may impact certain financial ratios like working capital cycle or return on capital employed, but it has benefited the company in the form of reduction in the finance cost. Future outlook of the company. Our strategy is to increase continuously the retail sale and downsizing EPC business, which is working well.
In future, within two years' time, our retail sales will reach around 50% of the total sales of the company with annual growth in the retail by 30%-35% per annum in retail business, which is evident from nine months period of FY 2022 results. We think that retail business offers superior growth prospects with better margins and lower working capital requirements. Capacity utilized during nine months of FY 2022 is 71% in the cable division, 66% in the housewire division, and around 100% in stainless steel wire division.
The company already has capacity to achieve growth in the next financial year, which is already in place. The company is in the process to expand the capacity for setting up a greenfield project for LT, HT, and EHV cables with an investment of INR 700-800 crore, which will be incurred in 3-4 years' time to maintain a CAGR of 17%-18% for coming years. Our last 15 years' CAGR is 15%, and last 5 years' CAGR is 20%, except 2021 financial year. Overall, the company is targeting more than 30% growth for all in FY 2022 with strong order book in hand and good demand from the government and private CapEx and as well as the real estate. I'll mention about little bit of demand drivers.
There's a continuous demand from government infra projects as well as private CapEx, especially from solar power projects, metro rail projects, oil and gas sectors, and steel, cement, and refining sector industry, underground cabling projects of transmission and distribution in metro cities, highway projects, including tunnel and ventilation projects, smart city projects, steel industry expansion. We expect that we will even grow in the export with exports, as we have seen in the Q3. Our export has grown by approximately 35% compared to last year. This is from the management side. I thank you very much for your valuable time in this conference call. Thank you. You may ask any questions if you may have. We'll gladly answer it. 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 Rahul Agarwal from InCred Capital. Please go ahead.
Hi, good afternoon, and thank you for the nice presentation, Anil ji. Good afternoon, Rajeev Ji. Sir, quick questions. Firstly, to start with, I understand copper was volatile and hence margins were soft for the quarter. Could you help us understand how does fourth quarter look like? How is the start to January and some price hikes are pending here to be taken in fourth quarter. Could you help understand some color on this, please? That's the first question.
The price hikes are continuously passed on whenever the raw material prices are increasing, they are taken into consideration whenever new offers are made. So far as retail is concerned, prices are, you know, practically readjusted every 15 days. The little bit of effect of 1% margin was there because of some, you know, some pending orders of extra high voltage and some other orders which were on the firm prices and all these orders has been executed and cleared. We do not have any pending orders at old prices in any category. Whatever orders are now there in the system, they are all booked from, you know, the copper and aluminum level, which are presently prevailing. We do not see any margin erosion in the coming time.
In the last three months, I think prices are also stable for copper and aluminum.
Margins go back to 11% fourth quarter. Is that understanding correct?
Yeah. I can't say exactly, but we hope that it will be maintained because there is no pressure of raw material prices now.
Got it, sir. The second question was, you know, we're looking at achieving very good scale on the housing wire side. We're almost running at INR 1,600 crore yearly run rate now. How has the pricing behavior been in the market for KEI for, you know, housing wire versus Havells, Polycab, Finolex? Are the discounts now versus these brands have reduced? Are we at par? Any color, please?
We are at par. I mean I guess at par maybe. We are still maintaining the same price levels, and definitely there is a price gap of 3%-5% from Havells and Finolex. Year after year, improving our margin and reducing this gap year after year from the stronger brands.
Got it, sir. Thirdly, on the order book, obviously as you said, dealer sales doesn't have an order book, and that is about 40% of top line. If I remove that sale from annual sales, we're talking about INR 3,000 crores of sales coming from non-dealer. And that is equivalent to the, you know, the average order book has been remaining in that range of INR 2,500-INR 3,000 crores. I just wanted to get your help on to understand this number. That, you know, is that decent enough to run a 12-month order book or is this number going to go up or down going forward? Because my understanding is housing wire sale growth is much higher than the non-dealer company. Obviously, this number, you know, will stay here. Could you help me understand this?
Yeah, I think you are right that order book numbers should remain similar because in this around INR 1,400 crore orders or INR 1,500 crore orders are only of the EPC. These orders will be executed over a period of two years. The rest the cable orders, which are in the vicinity of INR 1,550 crore, they will be export and EHV cables. They will be executed, they are executable within next 4-6 months maximum. Maximum 90% orders are executed within three months, but 10%-15% goes up to six months also. The numbers of the pending orders will remain same because 40%-42% coming from retail.
Got it, sir. Lastly, any expectation from the budget, as in anything specific on cables and wires in terms of duties, et cetera? Or is it largely gonna be again supporting and boosting government and private sector CapEx? That's my last question. Thank you.
We are not expecting anything from the government. I think they, by lowering the income tax, they have already done enough. What we expect is the demand which will come through the government spending, infra push and other policies like PLI, production linked incentive, et cetera, which will create, bring industry and create demand for Vasant Cable.
Perfect, sir. Thank you so much. All the best for the coming quarter. Thank you for answering. I'll come back in the queue.
Thank you. Participants, you may press star and one to ask a question. The next question is from the line of Lavina Quadros from Jefferies India. Please go ahead.
Yeah. Hi, sir. Congrats on a good set of results. I just wanted to understand, there was some delay in offtake. I mean, your working capital on the inventory side has been impacted a little bit. If you could just explain if there was any delayed offtake on deliveries and reasons for it. Thank you.
Yeah. Yeah, Lavina, first of all, if you go by holding period of the debtors and inventory, it has reduced further 0.25 months if we include debtor and inventory as compared to the last year. The working capital hit because you are seeing because of the current liability, the payable which Anil ji has told. The payable has reduced substantially by more than INR 243 crore, so it comes out to almost one month. Because of that, it is looking like that working capital increase, but it is not the case because whatever cash flow we were having, we are utilizing to reduce the interest bearing creditors.
And that we did around INR 14 crore of interest costs in terms of absolute number we have saved for that actually. Little bit inventory can be reduced further of the finished goods which definitely will be adjusted in this quarter by increasing the sale.
Okay. Sir, just a bit on the environmental issues. What was exactly that impacted ?
Close to, around INR 100 crore of finished goods was stuck because of these environmental issue in the month of December.
No, because we had a big stock manufactured for Delhi Transco, and some INR 50 crore-INR 55 crore worth of cables could not be dispatched because there was a ban on entry of diesel vehicles because of the pollution level in Delhi and also in the NCR region. A lot of dispatches could not be done for large institutional orders because they needed large trailers to transport, and they were banned.
Okay. That should.
That cleared in the month of January.
That has already been liquidated in January, already been dispatched.
Understood. Sir, lastly, the interest cost breakup, please, for the quarter.
You can write down. Interest on term loan for this quarter is INR 0.67 crore, and the working capital interest is close to INR 4.6 crore. LC interest cost, it has reduced. Oh, sorry. Please note again, the term loan interest is INR 0.48 crore. The working capital interest is close to INR 4.6 crore. LC interest is very minimal, just INR 0.03 crore. Bank charges on LC is also INR 0.09 crore. Bank charges on bank guarantee is INR 2.43 crores. The other bank charges like processing fees, et cetera, it is INR 1.27 crore.
Okay. Thank you, sir.
Thank you. The next question is from the line of Amit Mahawar from Edelweiss Financial Services. Please go ahead.
Thank you. Anil ji, Rajeev ji, congratulations on great retail driven growth. I just have one question. Typically, if you see the way we are going, you know, we will be crossing retail revenues, especially on house wires, you know, around INR 2,000 crore by maybe 2024. That should translate to a significant, you know, cash flow in our business. If I take on a three-year scale, you know, am I right in my understanding that generally we should be able to, you know, clock more than INR 250 crore-INR 300 crore plus worth of operating cash flow average in the next three years? That's my first question, sir.
You are right in the, Amit, because of increasing the of the retail channel sale, our cash flow is improving every year on it. Because of that, we are able to utilize our cash for the cash purchases which had reduced the already the interest cost. From here onward for next three years. Our capital expenditure is in pipeline approximately every year, INR 200 crore-INR 250 crore in the new CapEx area for low tension, high tension and extra high voltage power cable. That will be met through this cash flow only. Because of this heavy operating good cash flow, we are able to generate this kind of through the retail, as well as we are going to spend into the CapEx without taking any further loan, et cetera.
Yes, thanks. Thank you.
That is only possible because of this business model.
Sure, sure. Sir, maybe one more question, if Anil ji can help. Sir, typically beyond our, you know, cable expansion, which I'm sure, you know, should happen in the next two years. Generally beyond one to two year, how will you think of the, you know, retail franchisee? You know, maybe around once you attain a critical mass in wires, you will think of SMEG. But am I right in my understanding that maybe beyond 2023, maybe beyond 2024 is where we will have a bigger SMEG plan. Before that, it's anyway not feasible. Am I right, sir?
Actually, FMEG plans are there, but still we are more focusing on grabbing the market share for the existing product of house wires. That's why we are little bit conservative for adding new product. Still that is on the radar and in the planning stage also. That's why the 150 people who were inducted into the retail team of house wires, they have been taken from the various background of the electrical FMEG products. In future, within a year's time, definitely it will be done, but in the meantime, we are able to grow our house wire business.
Make sure. Thank you. Thank you very much. Sir, maybe one last
In this year also, in nine months, we have grown close to 70% of our dealer distributor business.
Yeah, yeah. If I exclude the pricing impact, it is still more than 35% value growth, sir?
Yes, yes.
Volume growth, sorry.
Volume growth is close to that.
Okay, okay. Sir, maybe one last question from my side. Of the current sales force that we have for branded wires, what percentage is there in Northeast, and you know, in South, in general?
Yeah, we have given the percentage also in the breakup of the revenue. Then the 37% comes from the North, second followed by West, that is a 31%.
Yeah. Sir, I saw that. My question is different. Basically, in the current, you know, sales team, you know, Northeast and South would account for what percentage of the, you know, manpower deployed for marketing and dealer distribution?
Anil ji is deploying more and more manpower in the South and eastern side.
We already have a good amount of manpower in the Northeast and Eastern India. Now we are increasing our strength in the South. South, we still have lesser people. Eastern India, we have already strengthened in last nine months, and that will show results in the coming quarters.
Okay.
South, we are now, this quarter is our focus. We'll be strengthening our marketing team.
Got it. Thank you, Anil ji. Rajeev ji, thank you. Good luck.
Yeah. Thank you, Amit ji.
Thank you. Participants, you may press star and one to ask a question. The next question is from the line of Naman Parekh from NSS Securities. Please go ahead.
Am I audible?
Yes, yes, Naman.
Thank you for the opportunity. Good afternoon, everyone. My question is regarding the CapEx plan for the company, like how much CapEx has been done for the quarter?
We are in the process of acquiring the land, and within one month time we will do the registry. The advances are given. Now the registry will start from the first of February, and then within one month the registration will be done. The land will be acquired, then we will restart doing the CapEx in terms of the building and advances for plant machinery, et cetera. It will take another 15-18 months' time to set up fully this project in phase one.
Okay, thank you so much. Like, can you let me know the amount of the CapEx that might be done in the, like, the 15-18 months period of the project?
15-18 months, as I said, in every year our target to spend around INR 200 crore-INR 250 crore in a year. In the current year it will go to close to INR 60-70 crore and then next year it will turn to INR 200-INR 250 crore, then again next year more than INR 200 crore.
Okay. Thank you so much. Namaste.
Thank you. The next question is from the line of Harshit Kapadia from Elara Capital. Please go ahead.
Thanks for the opportunity and congratulations for good set of numbers, Anil sir. Just wanted to check with you. Sir, in terms of margin, we have seen quite a deterioration on a YOY basis, well on a QOQ basis. Can you share, you know, in terms of product segment-wise, what are the margins that you have clocked that would help us to understand how fast can you be able to recoup the margins in the upcoming quarters?
See, in the institutional sale, as Anil ji explained, especially for extra high voltage power cable, where the orders are pending for 6-7 months. That got hit because this time the fluctuation was the sudden rise time actually, at one side actually. When the copper adjusted goes up and goes down, but this time it is going up and up again. Because of that, it got hit 1.5%. We were able to recover our margin by reducing the expenses versus sales to reduce the percentage. Because of that, we were hit only by 1% in this quarter.
Now since last three months, all the copper and all the metal prices are stable. In future it will be normalized now.
Sir, can you say what kind of a price hike you have taken in Q3 for the various segments in terms of retail? Yes.
See, in terms of retail, I think price hikes are around 5%-7% because in Q3 there was not much hikes, especially in copper. Copper had peaked in—I think May or June. So far as institutional business is concerned, it is every time we make an offer, we are always considering the, you know, existing price levels of raw materials. So the price hikes are passed on a continuous basis.
Okay. Just final question on the expanding your wire segment into different electrical business. Can we expect any launch in the next financial year in terms of product category? Then you can scale up your business. If you can share some insight on that will be helpful.
We are not expecting any launch of any other product in the next year. We are presently focusing on our wire business in the retail segment. Definitely, it is on our radar to add some other category products in the electrical goods which we'll let you know whenever we freeze these products.
You see, we are not in a position to earn the money from cable and burn the money into the new products. Because a little bit debt is still in the books. First our focus is to run the company without any debt and almost on the 75%, 20% we have covered the space to reduce the debt. Balance 25% that we are still doing, and we are hopeful within one and a half years' time we will reduce this debt also, whatever little bit debt is had. Because of that, we are going very conservative. At present we are more focusing on the wires. We are at present, suppose in house wires segment, we want to grab the market share of close to 10%. That is our focus.
We want to increase the sales through retail, whether it is from new products or from existing products. Existing product sale increase is better because it is giving us the good profit and good cash flow.
Thank you, Rajeev sir, for those extremely insightful answers. Thank you, Anil ji, and wishing you all the best.
Thank you, sir.
Thank you.
Thank you. The next question is from the line of Srinidhi from HSBC Bank. Please go ahead.
Yeah, hi, and thank you for the opportunity, and congratulations on good set of numbers. Couple of questions from my end. Firstly on, sir, guidance. We see quite a strong guidance over medium term. If I see next year, a lot of this growth that you're guiding has to come from volume growth. Just wondering, where are we drawing confidence in terms of this growth?
As Anil ji, in various sectors wherein he is seeing the growth and the orders are coming and very good order pipeline. We are having around INR 1,500 crore worth of orders from domestic institutions and INR 100 crore worth of orders from the export market for the cable segment. That is visible for us, these kind of demands and capital expenditure the government is focusing, whether it is in the power sector or in the infra sector. Everywhere this capital goods is required, where the cable will be sold actually.
Very good.
Actually, in the past experience of the last 15 years, wherein the economy was strong or economy was weak, still we were contributing close to 15% CAGR. It is close to 20%. Seventeen, 18% growth was never a challenge to KEI. Because of the setup we are having, we are having export, we are having domestic institutional, we are having the extra high voltage, we are having retail. Because of this, in institutional side, we are serving in a year close to 1,500 customers, 1,700 dealer distributor, then 50 countries to export. Very wide diversified customer base we are having. Because of that, we are always confident to grow at least 17, 18%.
Fair enough, sir. Thank you for elaborate answer. Sir, on this dealer and distribution network, would it be possible to throw some color on what this number could be from current level of 700 that you have? Sir, second is some of your peers major retailer reach, okay? A number close to lakhs. For some companies it is 150,000.
You see-
Do we measure that number?
Yeah, yeah. You see, this year our CMD, sir, has focused and given direction to all the marketing people to maintain the dealer distributor number, to engage with the strong dealer numbers, and to replace the weak candidates. The whole system was overhauled and the new dealer distributor were engaged by replacing the existing one. His vision was to first increase the sale of the existing dealer distributor so that their ROI can be increased.
I think your question was regarding whether we are mapping the retailers. Yes.
We are mapping the retailers which are working under a distributor. Many of our distributors are having 25-50 retailers to whom that distributor is catering to the retail shops.
The number of retailers are increasing.
Our retailer, our re-retailers should be around 20-25 thousand at the moment, but exact numbers I'm not having at the moment.
Very nice, sir. Sir, a couple of more questions, if I may.
Yeah, please.
On the retention money, sir, would it be possible to throw some light on how it has progressed? Is it as per your expectations?
Yeah, it is our expectation. As we guided earlier that INR 150 crore will be recovered from EPC division. We have already recovered INR 100 crore. Outstanding of EPC has gone down by INR 100 crore already. Within this quarter, the balance INR 50 crore will also be receiving.
I mean, we can just say that, next from FY 2023, the company should, will be able to generate, strong cash flows for the, in the company. This, we have already in this board meeting, we have already declared a interim dividend, of, INR 2.5 per share, which is corresponding to 125% of the, you know,
Equity capital.
Equity capital. As the free cash generation will improve, the dividend may also improve.
Very nice, sir. Last one, if I may, sir. Rajeev sir, can you update us on how much of our retail business is already under channel finance and how much of that channel finance distribution business is with recourse and those two numbers?
I think.
Hello, sir, and thank you very much for the opportunity. Sir, my question pertains, based on the order backlog that we have, what percentage of order backlog is protected with price variation clause?
The price variation is almost 10%-15%. Orders are with price variation, which is from the PSU side.
Sir, what kind of price hikes have been taken in first nine months and what kind of price hikes are you planning to take in fourth quarter for the retail channel?
I had already mentioned that in the third quarter, the approximate price hikes were around 5%-7.5% in different sizes of wires and cables, depending on the raw material configuration. I have said that we are adjusting the retail pricing every 15 days. So far as projects and B2B business is concerned, every time we are making an offer, it is done on the existing price level. During the execution period, we are building either enough safety margin or else we hold the stock or we, you know, hedge or book the copper and aluminum for that.
Effectively, if I can say that the gross margin compression that we have seen in the third quarter and in nine months FY 2022 can be attributed mainly to the institutional business which are fixed-price in nature and have been executed in the third quarter with higher commodity prices.
Yeah, you can say that.
Thank you, sir. My query is over, sir.
Thank you.
The next question is from the line of Devang Patel from NAFA Asset Management. Please go ahead.
Hi, sir. What is the volume growth we have seen for the cables and wire business in Q3 and nine months on a YOY basis, if you can give that, please?
In Q3, the volume growth was 18% and in YOY nine months it was close to 22%.
Okay. Secondly, what is our aspiration levels for the EBITDA margins once our retail share is 50% in a few years? Will we be reinvesting higher margins into marketing for new products on the FMEG side?
Actually, EBITDA, Anil Gupta, has told you that the 11% EBITDA will not be a problem. Year-on-year basis because our prices of the wire is lesser than our peer group, so we will be improving by 0.25-0.5 basis points year-on-year basis.
Yeah, 1% around we will be able to improve in the retail side.
Sir and overall.
Journey for next 3-4 years to reach or to bridge the gap of the prices.
Are you saying that overall EBITDA margins therefore will increase to 12% or only on the retail side you are saying it will increase by 1%?
Overall.
Yeah. In two years' time, we can reach to that level also.
Okay, sir. That's all from my side. Thank you.
Thank you. The next question is from the line of Rahul Agarwal from InCred Capital. Please go ahead.
Yeah, hi. Thanks for the follow-up. Sir, I wanted to discuss a thought. Being debt-free is obviously great. I mean, as you said, about one and half year you will be debt-free. Given the term loan rates for project debt today, you know, for the size of CapEx you're looking for and your, based on your credit rating, my sense is it will be lower than 7%. Is it possible to retain this cash in the balance sheet and look for distressed assets for FMEG or even cable and wire assets, if available in the country? Obviously, COVID had some impact on MSME. These companies sometimes are also bought for, you know, acquiring land assets, or they have, obviously, the plants are not attractive enough and they have old machines which are redundant anyway.
Any thoughts on the way we are going to utilize, you know, our capital and make better use of cash? Just a thought, if you would help understand this.
Sure. First of all, Rahul Agarwal, it should be very, very clear from our side that we don't acquire the assets rather, we believe to grow and develop in an organic way. That's how we are doing since last 30, 40 years. Our base is we are whether we had started EPC, whether we had started extra high multi power cable, or we will start in future FMEG, we will start from scratch, from our own manufacturing on a very strong footing. We are into very conservative mode for that purpose. As far as the cash, whatever will be available, we are utilizing. We are not keeping or not investing in any mutual fund or any other activity other than the operation. We are utilizing only in the operation wherein we can get the direct benefits rather than the here and there.
Whatever cash we were having, we still were utilizing for the cash purchase, and in future also we will be utilizing in the operation purpose only. Because in the debt reduction is, doesn't mean we cannot borrow because we are having these sanction limits and we will be having these sanction limits. At our, at any given point of time, any good opportunity for growth is available, that money will be available to us.
Sir, I understand that, but even after accounting for CapEx, you know, whatever range amount, we still will have more cash. Obviously, even after paying all these payables, you know, you've got it down significantly now.
Okay, sir. Is there nothing in India which is available which attracts you? Is that all?
No, sir. I was more coming from the land angle. Is that, sir, an attraction? No, sir. I was more coming from the land angle. Is that, sir, an attraction?
Why only 65 or 7,000? I think it can go much higher.
That's why I say sometimes it is not able to 100% utilize.
Hello.
Hello.
Yes.
As I really have told, that we can reach to the 6,800-7,000 also, but it is very well, safe, but it's conservative. For the next year we are targeting a 17%-18% growth.
With the current capacity.
Every year we do some de-bottlenecking in the existing plants and improve the efficiencies and increase the production by replacing older machines with the newer faster machines. There also we build up a little bit of capacity year after year in the existing factories. We have mentioned that we are going to do a CapEx and setting up a new greenfield project from April onwards this year in FY 2023.
Okay, got it. My another question was like, because we are increasing retail sales every quarter-on-quarter, so can we expect some time maybe in 2-3 years net profit margins of 10% because it is higher margin product?
I think we are already able to generate up to 6.5% net profit after tax. Improving it by 1% or 1.5% should not be a problem, but we can't give any guidance for this, you know. It will be always on the best effort basis. We'll definitely improve upon it.
Are we setting internally some ambitious targets for net profit margin or for sales?
No. We have given a guidance for sales growth by a CAGR of 17%-18%. That, and given the EBITDA of say 11%-11.5%, that itself will grow the net profit margin year after year. How much in percentage it can grow in terms of net PAT is difficult to say, but any PAT anywhere between 6.5%-7%, net profit after tax should be a good net profit on a bigger turnover, on a bigger sales.
Okay. Thank you.
Thank you very much. Ladies and gentlemen, you may press star and one to ask a question. The next question is from the line of Devansh from SIMPL . Please go ahead.
Yeah, sir. Thanks for the opportunity.
The line for the participant again dropped. Ladies and gentlemen, you may press star and one to ask a question. The next question is from the line of Dhananjai from SK Investment Managers. Please go ahead.
Hi, sir. Congratulations for good set of results. Could you repeat the capacity utilization numbers, please?
Capacity utilization in the wire and cable segment is 71%. In the house wire division it is 66% because we have added another factory in 2019. Our stainless steel wire division is operating at 100% capacity.
Okay, sure. Thank you.
Thank you. Participants, you may press star and one to ask a question. A reminder to all the participants, you may press star and one to ask a question. As there are no further questions, I now hand the conference over to management for closing comments.
Dear colleagues, thank you very much for, I mean, spending time with us for this question answer session. I again express gratitude to all of you to having invested with us and having faith in us. I assure you that company will give a good growth and a good cash flows in the quarter on quarter basis in the coming years to reward its investors. Thank you very much.
Thank you very much to everybody.
Thank you very much. On behalf of KEI Industries Limited and Monarch Networth Capital Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.