Our growth strategy is a combination of portfolio expansion, mergers, acquisition and geographic expansion- Ramesh Chandak, Managing Director and CEO, KEC International
This company transmits power... literally. The flagship Company of RPG Group, KEC is a global infrastructure EPC major. The company has powered infrastructure development in over 45 countries across South Asia, Middle East & North Africa (MENA), rest of Africa, Central Asia and Americas. While power transmission is its largest business vertical, the company is involved in the power systems, cables, railways, telecom and water sectors. Ramesh Chandak, Managing Director and CEO, KEC International elaborates on the company's operations, its future plans and the power transmission sector in India.
The power transmission sector in India currently faces a huge demand and supply gap. While the world average power consumption is over 2,000 units, we consume around only 785 units annually. To reach the world average levels, we therefore need to triple our power supply. Although the private sector is quite capable of attracting investments on its own, current policy paralysis is the core of all problems that the sector is currently facing. The sector is mired with some of the most fundamental issues such as fuel linkages, forest clearances and needs urgent attention by the government.
Tower'ing over others: There is a huge demand for 1,200 kV single circuit and double circuit, 765 kV double circuit, 800 kV HVDC and 400 kV multi circuit towers, both in India and worldwide. Typically, transmission towers tend to be heavy due to the weight of their conductors, insulators, OPGW, ground wires, wind on conductors, and torsional and ice loads on the tower. We recently tested 400 kV multi circuit towers weighing around 190 mt. While erecting transmission towers, we first develop their prototypes to suit different climate conditions.
Wiring growth:The cable market in India is worth around Rs 12,000 crore; out of this EHV cables (220 kV, 400 kV) worth Rs 300 crore forms 2.5 per cent of the total industry. Most cable companies in India manufacture low-voltage cables. Ours is the first transmission contracting company to manufacture cables in India. We manufacture 132 kV cables at our Thane plant, and also have an EHV cable production facility in Vadodara, Gujarat. Built with an investment of Rs 175 crore, this plant contributes Rs 350 crore to the company's topline.
Tracking development:An EPC company, KEC secures its projects through competitive bidding. Although, over the past three years we have majorly invested in civil and track projects in the Eastern region, we are also executing projects for East Central, Northern and South East Central Railways. KEC has been executing electrification projects for the Indian Railways since 1960-61. Till date, our company has electrified over 6,000 km of tracks - around 15 per cent of the total railway network in India. Our Railway Business Unit is involved in civil infrastructure, track laying, bridges, platforms and signalling projects, some of these located in Kenya and Turkmenistan. We acquired the railway signalling company, Jay Railway Projects Pvt Ltd, two years ago to strengthen our portfolio.
The challenges in the railway construction industry are similar to those faced by other construction sectors. The major issues prevalent here include 'Right of Way,' inadequate availability of resources, machinery and plant, lack of skilled, experienced manpower. Since competition levels are higher and profit margins lower, the contract values are low with jobs being more labour intensive.
Large-scale projects involving construction of freight corridors demand realignment of strategies and increase turnkey contracts awarded. It also requires a shift in EPC of railways from smaller contractors to corporate construction companies, who can handle such complex projects, are willing to share in the risks and rewards and have the financial strength to guarantee successful project execution and completion. This will help Indian Railways to fully exploit the project management capabilities available in the country.
Technologically perfect: Technology plays an important role in our company's operations. Our current combined capacity of 251,000 mt per annum, achieved through our five manufacturing facilities across India, Brazil and Mexico, is a result of the use of innovative technologies such as:
Automated construction is gaining importance due to the shortage of skilled and efficient manpower. It not only helps to handle large quantity of materials, but also maintains high quality standards. Our design centres in Mumbai and New Delhi are equipped with latest software such as BOCAD, PLS Tower, PLS CAD, Google Earth.
Spreading our tentacles: The growth in our sales figures is a result of the right combination of geographic and portfolio expansion. Our sales have been growing at the rate of 25 per cent since the last year. Year-on-year net sales have increased by 33.4 per cent to Rs. 1,364 crore with sales from America growing by 32 per cent during this period. Of this, 11 per cent is shipped from KEC India and 21 per cent from SAE. Despite the challenging global economic environment, we witnessed a 19 per cent Y-o-Y growth in our order book from Rs 8,100 crore in last corresponding quarter to Rs. 9,400 currently.
At KEC, we follow a growth strategy involving portfolio expansion, mergers, acquisition and geographic expansion. Six years ago, we were purely a transmission company; we have added RPG cables and telecom, railways and water businesses to our portfolio. Today, transmission constitutes only 68 per cent of our business while the remaining 32 per cent includes businesses acquired in the last five years. We are now expanding our new businesses to more geographies. In transmission, we operate in 30-35 countries; our cable business is spread over 30 countries, telecom in three countries and water in India and Malaysia. We aim to expand these further to 15 countries.
Year of establishment: Established in 1945 Top management: Ramesh Chandak, MD & CEO; Vimal Kejriwal, President-Transmission Business; George Varghese, President- Distribution Business; Vardhan Dharkar, CFO No. of employees: Over 4,800 Centre(s) of operation: India, Afghanistan, Egypt, Kuwait, NewZealand, Algeria, Ethiopia, Laos, Argentina, Ghana, Lebanon, Oman, Australia, Libya, Philippines, USA and many more... Ongoing Projects: Transmission line projects for PGCIL, Restructured Accelerated Power Development & Reforms Programme project (R-APDRP) in Madhya Pradesh, OPGW networks installation projects in East and North India, railway siding segment project in Maharashtra, railway electrification, civil works and signaling and canal construction projects across India. Turnover: Rs 5,815 crore. (FY12) Current order book: Rs 8,572 crore. (FY12)
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