KEC International expects to improve its margins, which were hit by higher raw material prices, with a continued focus on civil, urban infrastructure and railway projects. The RPG group firm was expecting to post a 10-15% revenue growth in FY22 but is likely to close the year with an 8% growth. The firm is also starting to bid for global contracts from Bangladesh, the West Asia and Africa for its oil and gas pipeline business, which would be a Rs 1,000-crore venture by FY24, its managing director and chief executive officer Vimal Kejriwal tells FE’s Rajesh Kurup. Edited excerpts:
Q. The third quarter was not one of the best ones for KEC International? Was this due to raw material headwinds?
We had a margin impact of roughly 200 basis points during the quarter due to raw material headwinds. We also continued to lose some money in our Brazil operations, which should more or less get solved by the end of this quarter. At the beginning of this year, we had guided for a 10-15% growth in revenues, but due to the geopolitical issues and continuing impact of Covid-19, we recorded an overall 8% growth during the last three quarters, which I think is good. We would be closing this year at around this growth rate.
Q. Which are the raw materials that were on fire during the quarter?
The prices of cement did not go up significantly, while that of steel and aluminium rose during the quarter which impacted the margins. Over the last year, we got enough supplies of steel, and so our exposure to steel has come down significantly. Now we are executing new orders and that will help us improve our margins. However, we won’t be able to go back to pre-Covid levels of 10% immediately but we will see an arrest in margin fall. The raw material prices had begun to ease, but then the Russia-Ukraine war is pushing it up again.
Q. What is the order book and tender pipeline position?
Our present order book position is about Rs 23,500 crore, with L1s (lowest bidder position) of about Rs 5,000 crore or so. So, we are roughly about Rs 28,500 crore. We have placed quotations of about Rs 20,000-22,000 crore and our tender pipeline has increased to Rs 55,000 crore. Our order book for civil business stands at about Rs 6,500 crore and revenue from the civil business is expected to double to Rs 2,000 crore in FY22. We will continue to focus on civil business, which we expect to grow by 40-50% in next year.
Q. T&D order intake was good for you this year…
Yes, this year we had a large order intake of about Rs 6,700 crore from the Training and Development (T&D) business. We have about Rs 2,000 crore of L1 in T&D, mainly from the West Asia.
Q. The tender pipeline from global markets remains strong, while that from the domestic market would pick up only from FY23?
Power Grid has come out with a lot of tenders now, and a lot of solar projects also coming up. I think from Q2 of FY23 onwards, we’ll start seeing a lot of action.
Q. Following the acquisition of Spur Infrastructure, you were also planning to bid for global contracts?
This is an oil and pipeline engineering procurement and construction (EPC) business and it will be a Rs 1,000-crore business by FY24. We will start bidding for global contracts from Bangladesh, the West Asia and Africa soon.
