Ladies and gentlemen, good day, and welcome to the KEI Industries Q1 FY 2027 earnings conference call, hosted by Nuvama Institutional Equities. As a reminder, all participant lines will remain 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 the operator by pressing star then zero on your touchtone telephone. Please note that this conference is being recorded. I will now hand the conference over to Mr. Achal Lohade from Nuvama Institutional Equities. Thank you, and over to you.
Yes. Thank you. Good afternoon, everyone. On behalf of Nuvama Institutional Equities, we are glad to host the senior management of KEI Industries Limited to discuss the Q1 FY 2027 earnings. We have with us Mr. Anil Gupta, Chairman cum Managing Director of the company, Mr. Rajeev Gupta, Executive Director of Finance and CFO. We'll start the call with the opening remarks from the management and then move to Q and A session. Thank you, and over to you, sir.
Thank you, Achal. Good afternoon. I'm Anil Gupta, CMD, KEI Industries Limited. I hope that you must have received a brief of our Q1 results. It must be with you. I'll give a brief. The net sales in Q1 of FY 2026/2027 is INR 3,185 crore, against INR 2,590 crore last year. Growth in net sales is 23%. The total Wire & Cable sale in Q1 has grown by 24.4% against previous year. During Q1 2026/2027, operating margin has improved to 12.43%. Margin has improved mainly because of the product mix and operational efficiencies. EBITDA in this quarter is INR 415 crore against INR 297 crore last year. Growth is around 39.5%. EBITDA/net sales margin is 13.04%, as against 11.49% in the same period previous year. Profit after tax in this quarter is INR 274 crore against INR 195 crore. Growth in the PAT is 40%.
PAT/net sales margin is 8.61% against 7.56% in the previous year same period. Domestic Wire & Cable sale in this quarter is INR 2,784 crore. It has registered a growth of 29%. Export sale in this quarter is INR 341 crore, against INR 375 crore previous year. The export is impacted because of non-execution of several orders of Middle East because of the war with Iran and also due to the custom duties issues in U.S. For a full year guidance, the export will be grown substantially and will be in line with our guidance as it's given earlier. Total sales of extra high voltage cable is INR 186 crore against INR 126 crore in the same previous period. Growth in EHV sale is 47%. The contribution of sale through distribution network, that is B2C, is 59%. Total active working dealer of the company as on 30th June is 2,128.
EPC sale is INR 43 crore against INR 61 crore last year. Out of that total sales of EPC, EHV EPC execution sale is INR 18 crore. Sales of stainless steel wire in Q1 is INR 53 crore against INR 51 crore in the previous year same period. Pending order book is INR 4,292 crore, out of which EPC is INR 271 crore, extra high voltage cable INR 793 crore, cable domestic INR 2,400 crore, and export order pending are INR 822 crore. The long-term rating from CARE Ratings and ICRA is AA+ and short-term is A1+. Book value as on 30th June is INR 725.94 against INR 697 as on 31st March 2026. Cash and bank balances as on 30th June is INR 1,054 crore, which includes QIP balance of INR 303 crore. Interest income from bank deposits or others in Q1 is INR 14.59 crore, which is included in the other income.
It was INR 28.77 crore last year in the previous year. The company had raised INR 2,000 crore through QIP on 28th November 2024, out of which company has utilized QIP fund of INR 1,785 crore up to 30th June. Unutilized amount is INR 303 crore, which includes the interest on FDRs of QIP amount. Future outlook. During Q1, the company has incurred a capital expenditure payment of INR 191 crore, out of which Sanand CapEx is INR 180 crore. Total CapEx done in Sanand up to 30th June 2026 is INR 1,722 crore. Another INR 300 crore will be spent in this financial year. Company is expected to incur capital expenditure of approximately INR 600 crore-INR 700 crore annually for next three to four years.
Capacity utilized.
Capacity utilized during Q1 is approximately 72% in Cable division, 61% in house Wire division, 91% in Stainless Steel Wire division, and 45% in communication cable. Sanand capacity addition is taking time to ramp up. In coming months, capacity utilization will increase month after month. Now, also we have sufficient capacity to grow in wires and flexible segments for next two to three years. Based on the strong demand in domestic and overseas markets, we are hopeful to grow more than 20% in next two to three years. There is a good demand in data centers and related energy segment in power, transmission and distribution segment, renewable energy like solar and wind, electric vehicles, infrastructure, railway electrification, urban infrastructure and manufacturing, in domestic as well as in global market. The wire demand is strong in housing sector and in commercial spaces.
This is a commentary from the management side.
The market comparison.
We are very bullish about the market. We hope that with a strong market outlook in domestic as well as our export markets, company will outperform in the domestic as well as export markets, and will be continuously growing year after year. Thank you.
Thank you. Ladies and gentlemen, we will 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 their handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We take the first question from the line of Natasha Jain from PhillipCapital. Please go ahead.
Thank you for the opportunity, sir. My first question is on the wires and cables margin. There has been a sequential sharp rise in wires and cables from 12.4% to 13.6%. If I see sequentially the OpEx number, that's pretty much flat, despite we've gone aggressive on the retail side, which is a high margin but a high spend channel. Even full commissioning of the Sanand plant should bring in some cost on the P&L. Could you throw some light here that what line item has remained consistent? Ideally, OpEx probably should have grown faster, and even on a year-on-year run rate, this is the slowest that we've grown in terms of OpEx.
As we have earlier also highlighted that as the incremental sale is going up, the fixed expenditure does not increase in that way. Accordingly, the expenditure versus sales percentage, if you compare it, is low and little bit because of the product mix. It is getting changed and some export we have the good margins order, all are reflecting in the P&L of the balance sheet. We have already crossed now hurdle, which was earlier that less than 11% operating margin we were operating. Now that hurdle we have crossed, and we hope that now we will be in the range of 11%-12% operating margin for the coming year.
Sir, you mentioned that you've gotten some high margin export orders. I remember in the previous many calls, you've always highlighted that export is a similar margin business for you as like it's in domestic. Have we now got orders which are better margin?
It is always when the demand is strong, in the global market, the demand is strong, little bit it is increasing. As you also witnessed that our earlier retail sale was close to 51% contribution, which has now increased to 59%. Put together all, it all reflecting in the P&L.
Got it. Sir, on the Wires and Cables segment, the next question is, the value growth has been 25%, but if I see now, given all peer set numbers have come out, I think the industry has grown by 35%, 33%-35%. Given pricing growth in itself is north of 28%, I know you don't give volume breakup, but could you at least tell us qualitatively as to are we prioritizing EHV or losing market share on the LV side, or what's happening in the volume mix?
Madam, it is not the case of the losing market share because the demand is very strong. Every sale required the capital. Whatever capital we are having, we have earlier guided also to grow close to 20%+ kind of growth because we are continuously having a CAGR growth target of 20%+. Accordingly, we need to put more and more also on the capital expenditure. Yesterday, we also announced our new capital expenditure in our Vadi factory, that is Salarpur, where we will put around another INR 700 crore to put another factory in next two years' time. It will go hand in hand. Whatever capital we are having, we are allocating at the same time towards the growth of the company as well as for the creation of the capital expenditure.
Because of that, we are not comparing anyone else, whatever they are doing, but we are growing whatever we are. Close more than 20%, our target was there, and we are continuously focusing that.
Got it. Sir, Salarpur is INR 500+ crore this additional INR 700 crore, right? Which takes it to INR 1,200 crore.
No. As in the commentary, Anil said, every year our target is INR 700 crore per year.
Correct.
The total CapEx of Salarpur is INR 700 crore. In the current financial year, INR 300 crore will be remaining CapEx of the Sanand, another INR 300 crore-INR 350 crore we will use in Salarpur. In the next year also, we will put the balance expenditure in the Salarpur, we will use another capital expenditure in the new lands, maybe in Baroda or maybe in some existing locations.
Got it. Sir, just one quick question, the last one. If I see inventory in your balance sheet, that has also increased sharply. Could you also throw some color in terms of what proportion would be, say, the exports which we could not do sitting in our inventory versus any inventory gains?
Major part of the inventory is increased mainly because of Sanand capacity is ramping up. Once the factory is new, the full inventory we need to create over there. The major increase due to only Sanand. Another maybe INR 6,200 crore in the finished goods, maybe sometime it is delayed dispatch or in the export case, even though the sale has happened by way of bill. Because of the Ind AS adjustment, if the finished goods has not reached, we need to reversal. Because of that, the inventory is highlighting high and the export is low. Actually the sale has happened.
Understood, sir. Thank you so much. I have more questions. I'll get back in the queue. Thank you.
Thank you, Natasha.
Thank you. We take the next question from the line of Praveen Sahay from PL Capital . Please go ahead.
Thank you for the opportunity. Just to further clarification on the margin side, because in the P&L, we can see there is a change in the inventory, which is on the higher side, nearly around INR 600 odd crore. Is there any inventory gain as well you had to book for this quarter Q1?
The inventory gain or loss is the part of the every quarter on quarter and year-on-year because prices are up and prices are down. That is not the major factor for the inventory increase. Inventory increase, as I just explained, because of the new factory of the Sanand, where all the raw material and work in process and finished goods is starting to have that kind of capacity. Second, when we do the export sale or institutional sale at the quarter end, there is a reversal if the material has not reached to the customer. Because of that, even though the sale has happened, but as per In AS, sale has to reversed. That's why the inventory is looking like this.
Second question related to Sanand. How much of the Sanand contribution for this quarter or what you are expecting for FY 2027?
Sanand phase 1 capacity has already reached to 50% utilization as on today, and in coming months it will ramp up further from there.
Just to referring to the media interaction. Sir, as highlighted, nearly around INR 3,000 odd crore of additional revenue from the Sanand for this financial year. This financial year you are INR 3,000 looking for from the Sanand and how is that?
No. In media interaction, it was a little bit of a slip of tongue. We expect around INR 1,500 crore-INR 2,000 crore revenue from Sanand in this financial year, which will come in the contribution in FY 2027.
The overall growth, Praveen, will be more than 20%, because as you see, when the new factory is there is lots of challenges for manpower, then machine, then the other environmental factors. That is how it is taking time, and month after month, the production is getting increased over there.
Okay. Thank you, sir, and all the best.
Thank you. Participants who wish to ask a question, please press star and one. We take the next question from the line of Raman K.V. from Sequent Investments. Please go ahead.
Hello, sir. Can you hear me?
Yes.
Sir, with respect to Sanand, we have already spent around close to INR 1,700 crore for the CapEx, and we will be spending another INR 300 crore. You initially guided that we can do from Sanand facility around INR 6,000 crore of revenue. Am I right?
Yes, sir.
Yes, sir. I just want to understand in Sanand, what kind of products are we catering to, and phase 2, in which we will be spending additional INR 300 crore-INR 350 crore this year, are we planning to add the existing capacity or are we planning to add new high margin cable and wires capacity?
Sanand project is not yet completed.
Okay.
Phase 1 has completed, that is for low voltage and medium voltage power cable. We added the machinery over there, which is operational now in the second quarter for the electron-beam cable. Now we are in the execution for the extra high voltage power cable for which we are making a 152 m tall tower over there. By March 2027, our extra high voltage power cable project also will get commission. By next year, the full capacity will be available and close to overall capacity in the next financial year, 70%-75%, we will be in a position to utilize for next financial year.
The entire INR 300 crores will be spent on the extra high voltage cable?
No, no. It is a part of the project. The total cost of the project was INR 2,000 crores.
Okay.
Already we spent INR 1,722 crore, and balance remaining will be spent in the coming six months.
Just a follow-up here. You said around 70%-75% utilization you will try to achieve next year. That closely translates to INR 4,000 crore of revenue. Is my calculation right?
Yes.
Okay. Understood. Sir, with respect to the margins, in the earlier guidance, you mentioned that there was change in product mix which led to the margin expansion. Is it because there was a good amount of contribution from Extra-High Voltage cable? Or can you just specify what kind of product led the margin expansion?
Yes. It is a mix of three, four things.
One is Extra-High Voltage power cable contribution has increased. Second is the overall retail dealer distribution contribution has increased. Because of the top line higher, the expenditure versus sales ratio has gone down. It's a combination of three, four things.
Sir, just a follow-up here. What will be the incremental margin, if you can give a ballpark figures, when we are selling Extra-High Voltage power cable versus low and medium power cable?
Our Extra-High Voltage operating margin was close to 15%, as compared to low voltage and medium voltage power cable institution side was 10.5%, and retail side was 11%, and export was more than 11%.
Out of this INR 6,000 crores of revenue expecting from Sanand, can you give a split between how much can we do with respect to Extra-High Voltage? I just want to understand if the
INR 1,300 crore capacity belong to Extra-High Voltage power cable, balance for low voltage and medium voltage and electron beam cable.
Sir, with respect to the INR 700 crore CapEx every year, which you want to do, is it on the Extra-High Voltage side? I just want to understand the market of Extra-High Voltage.
The new investment will be for low voltage and medium voltage, which we have just announced yesterday.
Extra-High Voltage power cable capacity, we will be expanding further only here only itself, in Sanand. Whenever we need, we will add more lines here.
Sir, what is the total market opportunity from extra high voltage?
As of now, it will be more than INR 3,000 crores.
Okay. Are you the only player or is there any competition?
No, there are Universal Cables also.
Okay.
There are imports also.
Understood, sir. Thank you. Thank you so much, sir.
Thank you. Participants who wish to ask a question, please press star and one. We take the next question from the line of Umang Mehta from Kotak Securities. Please go ahead.
Hi. Thanks for the opportunity, congrats on a strong margin print. Sir, first question was again on margin. You mentioned product mix and efficiencies in the operations. EHV, sir, 5% going to 6% won't move the needle too much, right? Secondly, in terms of operational efficiencies, if you can share some more color. Thirdly, just wanted to check, have you changed anything on wires pricing? You were earlier looking to reduce the discount versus peers. Is that something that is helping your margins?
[Non-English content] Umang, three, four things where the pricing plays a role. The overall growth of the company and resulting in expenditure versus sales ratio. In each and every market, we are trying to build our product well-placed because we are spending in the advertisement, we are pushing through the IPL, our brand are very popular. That's how our dealer distributor sale is also reflecting from 51%, we have now reached to 59%. Our focus is to shift the market where the lower working capital are there, how we can improve the margins, whether from retail or from exports, and ultimately it is resulting to increase 1%. Now we are in the trajectory for the future where 11%- 12% operating margin we will be operating. Earlier our hurdle was reaching out to 11%+ .
Now we have crossed that hurdle actually.
Understood, sir. Sir, second question was on this growth versus margin trade-off. I understand where you come from, where you don't want to grow, or maybe from working capital perspective, you want to restrict growth to a certain percentage. In counters where peers are growing faster or where you might be letting go of some business, is it easy to win that back when the situation turns? How do you think about that on competition front?
Sir, we are very old in this market, continuously since last 15 years, we are growing at a 16%-17%. We started our growth rate at 17%-18%, 19%-20%. Now we are targeting 20%+ growth because we are a debt-free company now, we are continuously allocating our capital in two parts, one for working capital and another for the capital expenditure. Certain discipline and capital allocation need to be there in the company so that long-term goal, sustainable manner we can achieve. That's how we are going ahead with our original plan of which we've given you in 2024 while we were raising the QIP. The same kind of growth plan we were maintaining, we will be maintaining.
This kind of discipline also we will be maintaining, and those investors, those who are dealing with us since last five years or even 10 years also. We are very conservative people. Whatever we say, we try to deliver more than that.
Got it, sir. Thank you so much, and all the best.
Thank you, Umang.
Thank you. We take the next question from the line of Disha from Trinetra Asset Managers. Please go ahead.
Good afternoon, sir. Most of my questions have already been answered. Just a few questions from my side. Could you share the current utilization level across Cables & Wires for this quarter? I hope I heard it correct, you said 70%-75% of utilization would be by this year, right?
No, no. First of all, at present, because of increased capacity of Sanand, our utilization rate is 72%. For the future, somebody was asking that how much capacity will be for the next plant, INR 6,000 crore plant. I was explaining 70%-75% we will be utilizing by next year.
Okay. For the next year. Sir, at what utilization threshold would the company require another major CapEx cycle beyond its ongoing expansion as you see the demand clearly coming up?
To maintain a CAGR of 20%+ , we need to continue growth of the capacity also. For that, we have given our guidance to do the capital expenditure of INR 600 crore-INR 700 crore year after year. We need to grow every year, we need to add the capacity also every year. Whenever we go for a greenfield CapEx, it takes us to complete the process for the two year, actually. Like yesterday, we announced for the Salarpur project, where we will be investing around INR 700 crore. There also, it will take another two years to complete construction, plant machinery, trial run production, like this.
That plant will be catering.
In the current market, the demand is strong because of the electrical vehicle data center infrastructure boom, and the global demand is also very, very strong. Yeah, please, you are asking something?
Yes, sir. I was asking about this new CapEx plan that you have announced. That will be for EHV cables, right? You answered that question.
No, no. It is for low voltage and medium voltage power cable.
Got it, sir. One on the EHV cable segment side. Could you please update how much of this customer approvals or order inflow is coming from EHV? At what point do you expect that EHV business will become a meaningful contributor to the consolidated revenue and margin, and will it further increase the margins of the company?
Whatever capacity we are adding for Extra-High Voltage power cable, close to 9%- 10% will be the contribution from EHV cable.
Got it, sir. That's it from my side. Thank you.
Thank you, ma'am.
Thank you. We take the next question from the line of Achal Lohade from Nuvama Institutional Equities. Please go ahead.
Yeah. Sir, thank you for the opportunity. In terms of the global market, if you could talk a little bit in terms of how we are playing across the regions. Where are we in terms of the scale-up? What kind of mix can we expect over next two, three years in the export segment across different geographies? If you could comment a little bit on that.
Yeah. I'll comment on that. In different markets, we are targeting different sectors. Like in U.S., we are steadily working with oil and gas sector and also with the data centers projects. Now we are also working with
some distribution projects in U.S. In Australia, we are mostly working with solar and wind energy projects, and also some manufacturing factory industrial projects as well. In Middle East, our major customer base is oil and gas refineries and upstream facilities there of oil extraction. Majorly oil and gas market is there in Middle East. In Africa, we are working with distribution and transmission utilities, and also the oil refineries. This is the major focused areas in a few of the countries where we are working in our export markets.
Any possible mix you would talk about, let's say, in three years' time?
See, it is very difficult to determine product mix, because it keeps on varying. We have very versatile product range and production facilities. We are able to adapt to any change in the type of products in our factories as per the market demand. How the market demand emerges is very difficult to predict.
Got it. Sir, second question I had was with respect to Sanand Plant. Given INR 2,000 crore of CapEx and the EHV and the non-EHV mix, how do we look at the asset turn and the total revenue potential from this facility?
Achal, earlier we told that this total INR 2,000 crore will give us a production of INR 6,000 crore, but in the past experience, whenever we go for a greenfield project, after the commissioning of the full project, there is a scope for the balancing of equipment. Another INR 100 crore-INR 200 crore we are putting for balancing of equipment, which will give us another INR 1,000+ crore turnover. The total capacity will reach around INR 7,000 crore within two years' time in Sanand. That's how we executed in the past also. If you see our Chinchpada plant, initially it was only for the wire. We added the low tension power cable over there. We added a few more capacity over there. As of now, this plant is giving us very huge turnover. Approximately INR 225 crore-INR 250 crore per month turnover is coming from the Chinchpada plant.
That's how the balancing of equipments work actually.
Got it. Sir, you did make a comment, demand is strong, but if it is possible to get some more color in the domestic market, how the different verticals within the demand drivers are doing. If you could talk a little bit on that as well.
See, major demand is there in India, mainly in power generation, transmission, and distribution sector, and also the power energy user sector, which includes data centers, manufacturing plants, urban infrastructure, and railway infrastructure. There's a strong demand in the housing and commercial spaces also. These are the major sectors where the domestic demand is there. Even now, even the thermal power projects are also in strong construction phase. That will also be bringing substantial demand in India.
Understood. Any of these are particularly doing very well and little bit weak, if you could call out a little bit, sir, on that?
No, I have no comments on that.
Achal, always it happens because it's a rotating demand. Sometimes demand come from transmission, then comes from distribution, then again from the generation. It's basically move on. Sometimes the refinery projects are there, sometimes fertilizer projects are there. The demand is also rotating because in every year, the capital expenditure is rotating from one sector to another sector.
Fair point. Just last question from my end, sir, we again go back to the queue. In terms of the demand supply, we see that practically everybody's adding capacity. How do you see this demand supply scenario? Is there any risk of overcapacity over next one, two years in your opinion? Or things are pretty much tight for next two years?
Sir, whenever there is addition of capacity, it takes two and a half years' time to put up a project. Another one year time for ramping up the production facility. You see in our Sanand plant, we started in 2023. Now almost three years is there. Now the project has commissioned. Still we are ramping up. It takes time. From your angle, you must see that so many projects are coming, but those companies, those who are putting the projects, the construction time of the project is also two and a half years to three years' time. For utilization of capacity is also three to four years' time. It is not the case that whatever we put, we will use the capacity only in one year.
That's how we are again guiding for the disciplined growth, that 20%+ CAGR growth we will maintain. We are never targeting for a growth of a 35% or 40%. That's how we are having the discipline, and accordingly, the market is available.
Got it, sir. Thank you. I'll fall back in the queue. Thank you.
Thank you. We take the next question from the line of Manoj Gori from Equirus Capital. Please go ahead.
Yeah, thanks for the opportunity, sir. Congratulations on strong margin performance during the quarter. Finally, the barrier of 11% has been broken. My only question to you would be that if you look at the end of fourth quarter FY 2026, we were talking about roughly around 18% volume guidance. In the morning, in the media interviews, we said around 25% kind of value growth for the current year. Now we are talking about 20% value growth.
Sir
on YOY basis.
Sir, that
If you can clarify.
Also, I'm sure that our growth in this financial year will be more than 25% in financial terms, in revenue terms. Normally, in the interactions, we generally likes to be conservative instead of giving too bullish numbers.
[Non-English content] That's why we want to be conservative.
[Non-English content]
[Non-English content]
[Non-English content]
[Non-English content]Demand is there, it is not the case that we need to put all our capital only for growth, how we will maintain a future growth if we are not putting the capacity. We need two type of capital. That's why we want to be a little bit conservative. Still, the same kind of growth you will see for full year, whatever you have seen in the quarter one because the demand is there, we have the capacity. Our request to all of you not to add into that expectation. That is my humble request to all of you.
Okay, sir. The only reason why I asked was because if you look at there has been prolonged issues in Middle East, the West Asia crisis definitely would be hurting to some extent on the exports also. Just wanted clarity because of the macro uncertainty. I do understand that the domestic growth opportunities remain very strong and robust. Just for clarity, the question came. Yeah.
Manoj , we also explained in the past also, we need to grow. Whether we need to grow from export, from domestic institution or from the retail network. Ultimately, sale is sale for anyone. Our purpose to focus on all the markets, so that if any time any market is having some problem like the Middle East problem is going on, we can compensate our sale from the other market. That is the major focus area where we are trying to build that, whether marketing from export, marketing from domestic or institution. We need to focus all the sectors. We cannot know in advance which sector will do good, which sector will not do good.
Correct.
That's why that is our duty to focus all the sectors. That's how we are continuously doing since last so many years. Your earlier wish was that when we will cross that hurdle of 11%. With all of your blessings, we have crossed that hurdle, and in future, we will be operating more than 11% EBITDA margin. That we are very hopeful.
Sure, sir. Thank you, sir. Wish you all the best, I hope you break many more hurdles like this.
Thank you, Manoj . Thank you very much.
Thank you. We take the next question from the line of Akshen Thakkar from Fidelity International. Please go ahead.
Hi, sir. Am I audible?
Yes.
Hi, sir. Congratulations on a very strong margin performance. Just one clarification. In the past, when you have guided for EBITDA margins, you've included other income in the same. Right now, when you're saying 11%-12%, we should read it as EBITDA plus other income, or this is only pure operating EBITDA margins?
Sir, it is an operating margin I'm talking because you people always evaluate us only on operating margin, and that's how the operating margin we are disclosing.
Okay. This doesn't include other income then, right?
Yes, sir.
Okay, great. Second, sorry to belabor this point, on Sanand, if you were to, Anil was saying, it should do INR 1,500 crore-INR 2,000 crore this year, even if it were to come up in a gradual manner and exports will pick up. I'm just trying to think that what's the constraint to growth. I think you mentioned working capital a little bit couple of times in the past and today as well. Just if you could help us understand a little better because I think what's happening frankly is that Street's extrapolating the metal price increase and thinking growth should be higher, and obviously you're doing very well, and no complaints there, and it's along the guided lines. Just to understand the constraints to growing faster.
Sir, constraint is basically the capital.
Sir, I'll tell you. In a greenfield project, the production ramp-up takes time in terms of manpower and machinery stabilization. Hence, I said that month after month, our new facility. If it is a brownfield extension, it is easier to stabilize. In a greenfield expansion, it has taken time. That is why, month after month, our production ramp-up is coming up, and capital allocation is definitely a discipline which Rajeev has talked about. What I'm saying is that we will be growing more than what we are saying, much more than that. We don't want to give very high numbers as a guidance.
I think that philosophy is very well understood. We just love to see a little more aggression on growth. Margin pay, what you had promised, you've delivered. Margins have come up. Very happy. All the best to the team for the upcoming year.
Thank you very much, sir.
Thank you. We take the next question from the line of Rahul Maheshwari from Ambit Investment Advisors Private Limited. Please go ahead.
Good afternoon, sir. Excellent execution. Just two questions. First, on Wires. Can you elaborate what kind of growth are we witnessing? Also the dealer contribution has gone to 59%. How much more scope is there? This is first question. On second, can you highlight that big projects like what the leader is executing on the BharatNet, et cetera, how are we planned in those directions of executing the big order projects of the government? Thanks.
Sir, BharatNet is mainly for optical fiber cable supply and execution. We are not in the manufacturing of optical fiber cables, so that is out of our product range. Second question was?
On the Wires. Sir, I was mentioning big ticket size products-
Wire growth is already more than the cable growth because the construction phase is going on in the country. Overall, the domestic Wire and Cable business is very strong.
Sure.
And-
Yeah.
Yeah, please carry on.
Yeah, go ahead, sir.
No, please. BharatNet, I have already answered that we are not in the production of optical fiber cable.
Okay.
We don't produce cables for BharatNet.
Just one other thing that, as you highlighted a lot of times, that it requires capital and then it takes time to ramp up the capacity. If the industry growth rate for next two years is happening at 30% or near about those levels, is it fair to say that you will up your guidance, or you will like to maintain at a guidance which you have mentioned conservative at 20%+?
We will.
Yeah.
We will be growing more than what we are guiding, and we will be to the level of industry standard, but we don't want to give very high numbers.
Sure.
That is not our policy.
Okay. Thank you, sir, and best wishes.
Thank you. We take the next question from the line of Pathanjali Srinivasan from Sundaram Mutual Fund. Please go ahead.
Hello, sir. Thank you for the opportunity. I have a couple of questions. Firstly, our gross margin is at a four or five-year kind of high. I think we were at 25% gross margin back in FY 2022. Can you tell me if this gross margin level that we are at today is sustainable? Last two, three quarters, we have seen a very sharp improvement in terms of gross margin.
Sir, because earlier the EPC portion was higher. Now the EPC portion is not there, only the pure cable and wire portion is there. Because of that, and the product mix, and the export and the retail market. If you see the continuous last four quarter, from June onward last year, September, December, March, and this first quarter. Quarter after quarter, whatever we have planned for the next year, we have reached to the situation where we were in the margin range of 11%-12%. As I explained, whenever a margin increase of any company, there are three, four leverage. One leverage is the mix of the product, Second is the mix of the markets, The expenditure ratio versus sales ratio. All these three are contributing towards the profit and loss. It is not only the one case where the margin has increased.
No, sir. That part is understood, sir. Can we expect that gross margin should be in this range? I get what you're saying. Okay, sir.
Sir, gross margin is good because, as I said, gross margin will be in this range only. Sometimes you see, sometimes the volatility in the market by way of the rate or by way of the demand scenario, always quarter to half percent margin fluctuates quarter-to-quarter basis that you will see or you will witness in the past results also. For the full year, it is average out always. Now we are in the trajectory where we will operate 11%-12% EBITDA margin. That is operating side.
Got it, sir. Sir, I just have a few more questions. I think one of the things you mentioned was that export share of revenue will come back again. I think you've mentioned this quarter's bit on the weaker side. What would be a target for the firm on a full year basis? What would we want to have our export as a percentage?
Sir, the thing, ultimately, as I said, Anil has said that growth rate will be close to 24%-25%. The first target figure will be that. Out of that, sometimes the export will grow more, sometimes the retail will grow more, sometimes domestic institution will grow more. It will always happen from sector to sector. Our target to reach export at least 17%-18% for the current financial year. Even the last financial year also, it was 16%.
Got it.
That we will be there.
Okay, sir. Sir, just one last question. I wanted to confirm something you mentioned. You said this INR 2,000 crore of CapEx that we have done or we are underway, the revenue it can generate is how much you mentioned? I think I heard it at INR 7,000 crore, but I just wanted to confirm.
No, Sanand revenue originally was INR 6,000 crore. In future, when the project get completed with the few crore of balancing equipment, we always increase the production facility over there. That's how it will increase to INR 7,000 crore within two years' time. That I mentioned.
This is EHV and HV all put together, you are saying INR 2,000 crores will give around INR 6,000 crores-7,000 crores, is that correct?
What Rajeev wanted to say that instead of three, effect terms of three, it can go up to four times.
Three and a half times.
Yeah.
Okay. Okay, sir. Got it, sir. Thank you, sir. Congrats on very good set of numbers.
Thank you, sir.
Thank you. We take the next question from the line of Pulkit Patni from Goldman Sachs. Please go ahead.
Sir, thank you for taking my question. Sir, this has been two quarters where not you, but most of the industry has not spoken much about volume growth. Revenue growth has been phenomenal. What I'm trying to understand is that your commentary, some of your peers' commentary, also on demand has been extremely positive in terms of how they're looking at the outlook. As analysts, are we not looking at the right thing? I'm trying to understand with volume growth not being there, is it just that the nature of the product has changed? Are you doing more high value products and that's how the business is going to trend? I'm just trying to understand why that disconnect between volume growth, value growth, and the positive commentary that is coming from you as well as some of your peers. Just help us understand that a little better now.
Pulkit , first of all, why we are talking on value growth, because the government expenditure budget maintain in the value terms only. If in the budget they have allocated the INR 11 lakh crore, whatever the price is gone up or gone down, can this budget expenditure they have fixed for the capital expenditure will change? I think it will not change. Same case with the state government also. Same case with the power generation, transmission, distribution also, everything. Allocation of the budget is there. That's how the value prevails actually. Because of that I have also explained in my investor conference why we are reluctant to give the value growth. Even in the past, even if you go back to 2018, 2019, 2020, even in 2017, 2018, continuously the copper price was going down.
Despite that, all the cable companies were growing. The rationale behind was that the capital expenditure allocation in the budget was in the value. Because of that, we will take the demand from the infrastructure, from the government, from the bridges, railway, transmission, distribution, generation. Everything relates to the value only actually. That is my humble submission.
Fair point, sir, your commentary is reflective of the strong outlook. I was just trying to understand that, your view is in a scenario that copper prices go down, volume will do the heavy lifting so that the revenue number comes close to where we are thinking it.
If the INR 11 lakh crore government budget is there and the state government budget is INR 6 lakh crore, sir, that budget will remain as it is. Whether the copper price or aluminum price or steel price going up or going down. Because of that, ultimately, they spent in the value, not in the volume. Everybody made their balance sheet in the value, not in the volume.
Sure, sir.
If the capital is available in the value terms, it will also go into the order book.
Fair point. Sure. That is very useful, sir. Thank you so much for it.
Thank you, Pulkit .
Thank you. We take the next question from the line of Shirom Kapoor from Jefferies. Please go ahead.
Hi, sir. Thanks for the opportunity. Just want to ask you on your exports bit. You just gave a target range of around 17%-18% of your sales this year to come from exports. Just want to understand that just based on FY 2026 numbers, that would imply around 30%-40% growth in FY 2027 in exports itself, in the first quarter, we've seen a decline actually of around 7%-8%. Does that mean you're expecting in the balance nine months to grow at over 50% in exports? Especially given same time last year, the balance nine months also saw 50%+ growth in exports. What gives you that confidence of growing that 50% in this-
Yeah. I think you're right because we could not dispatch lot of goods in the first quarter because of the Middle East crisis, and shipments were not available, which have started now, but albeit at a high shipping cost. Similarly, U.S. also has opened up, which was stalled. The markets are positive and we will be able to achieve what we are saying.
Sir, one more humble request to all of you is that sometimes what happened even in the last year, when export grows more, so some of the analysts says that if the domestic demand is weak. If we see, if we need to grow 24%-25%, whether we grow in export, grow in retail, grow in institutional market, it will be again into the 24%-25%.
Right, sir. Thank you. Just secondly, in your presentation in previous quarters, you would normally give that break-up of your sales across house wires, low tension, high tension cables. Maybe this time that break-up was missing. If you could just share, what was your house wire-
No, sir, we cannot give that figure because now the computer was using those numbers actually, so that is why we have decided not to go for individual product wise number actually.
Oh, got it, sir. Just lastly on the retail sales, which has risen to 59% this quarter, is that a number you see sustainably going ahead? 40% growth in the first quarter, is this growth sustainable or do we just if you could comment on that.
Sir, as I said, we are more focusing towards retail mainly because of lower working capital requirement. Sometimes when the export order is more, we need to sell to the export market also. This mix can get changed internally, but overall growth rate will remain.
Got it. Just lastly on your other income, could you explain the drop in your other income from around INR 40 crores to-
Sir, in the last year, other income was mainly because of the QIP, the interest cost.
Got it
QIP money was lying in the FDR, the interest cost was high there.
Right. The other income that we saw in FY 2026, that is unlikely.
Yeah
sustain in FY 2027.
Mainly.
Got it.
Yeah.
Got it, sir. Thank you so much.
Thank you very much, sir.
Thank you. We take the next question from the line of Bhavani from Axis Capital. Please go ahead.
Yeah. Hi, sir. Congratulations on good set of numbers. One clarification. What is the kind of price hike we have took, sir, in Q1?
Price hike, it is not a percentage . It is basically depend on the how much the copper content is going up or going down. Accordingly, that formula is there. It is not the base case. It is directly depending on the price fluctuation.
Understood. Sir, most of the prices has been passed on, right? The cost inflation has been passed on.
Yes.
Understood, sir. Thank you so much for this. Thanks.
Thank you, Bhavani .
Thank you. We take the next question from the line of Bharat C. Shah from BCS Capital Ideas Private Limited. Please go ahead.
Yeah. Namaste Anil . Namaste Rajeev.
Namaste Bharat .
We see most things seem to fall in place. We now have better production capacity available, with a good runway ahead for growth to capitalize on. The export situation is also shaping up well, unless Mr. Trump comes up with something peculiar again. Other than that, overall situation looks very healthy there. Given our greater business in value-added products and increasing retailization of our Wires business, the size of opportunity continues to keep expanding at a rapid pace. In scenario like this, it is easy to feel overconfident and less worried about probably challenges which may be lurking around. What, in your opinion, could be potential spots of trouble? What can really be a spoiler? May not be a spoiler, but it can dampen, if at all, any issues that worries your mind?
Bharat, the kind of business we have created with so much of widespread of customer base and in India as well as in different geographies, the purpose of creating this kind of base is that we insulate ourselves from any possible impacts, risks from any particular geography or territory. Even if we have seen blockades from U.S.A., we have seen the wars in Middle East, which led to stoppage of shipments, but still we have been able to grow from wherever our customer base is there. Risk factors. Nobody knows about in today's time what geopolitics does. Our aim is to remain risk-free in terms of our financial goals and our marketing goals, so that we are spread over in so many countries that we are able to make up our sales from somewhere or the other.
Similarly, now we are a debt-free company, to that extent, risk of any dent about some markets or some lower sales, so we are insulated from that. See, you can't have zero risk ever. How do we mitigate the risk? That is what we have been doing.
Absolutely. All those points have been very much in evidence in terms of the prudence in which we have conducted our balance sheet, we have conducted our business, and in a very calibrated way, we have continued to grow. I understand that external threats or challenges could materialize over which we do not have any real control. Internally, have you seen any constraints or any issues that need to be mindful of or to be sorted out?
Sir, internally, as we have discussed even in the past few years, where we have highlighted earlier that the risk for the sustainability or for the capital allocation that we have fully addressed, and even for the debt risk, we are fully now debt-free company. Whatever risk any investor has highlighted to us or internally, we in Vizag, we try to mitigate those risks. Accordingly, we are disciplining ourselves, even though in spite of in this one-hour call, everybody was saying, "Why can't we grow 30% or 35%?" Even though the market is there, the debt can be arranged easily. We are still reluctant to say that we will not grow more than that, only because of the discipline, the proper capital allocation policy. That's how we have learned over a period of time in the past, and it has paid us well also.
We will be keeping in our mind that good capital allocation, proper risk mitigation, and a long-term, at least for five-year sustainable plan, business plan, we are already guiding you as well as to the complete market, accordingly, we are going at that time.
Investor conference call is just going to finish in two minutes.
Rajeev, when do we once again cross or touch 30% or higher return on capital employed? Will it be in 2027-2028?
No, sir. Because of the CapEx is going on. As of now, we are having 23%-24%. The second question, because our creditors are very low, it is because of the good financial health of the company.
Yes.
We are buying our metal on cash. Otherwise, if we buy metal against the LC, it will be seeing at least 28% as of now itself. Because of the creditors, which was earlier used to be three and a half months, it is now only less than one and a half month.
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Okay.
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Last question. In the year of 2027, 2028, is it possible to think of that turnover of INR 20,000 crore, or it is just being too greedy?
No, no. Sir, whatever we are guiding, we are guiding accordingly. The capacity we are created, we have not created only for one year. It will be created for another two years because the next plan which we announced yesterday, it will take another two years. We need to utilize that capacity year after year.
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Okay. Thank you, Rajeev. Thank you, Anil. All the very best.
Thank you. All the best. Thank you very much, sir, for your blessings.
Thank you. Ladies and gentlemen, with that, we conclude the question and answer session. I now hand the conference over to the management for their closing comments.
Thank you very much for joining this conference call. We are always available to answer any other questions or queries you may have. Thank you so much for joining.
Thank you very much, sir.
Thank you, sir. On behalf of Nuvama Institutional Equities, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.