Dr. Faruk Patel, Chairman & Director, KP Green Engineering Limited

21 Mar 2024 , 05:48 PM

Help us understand the business model of the company.

We are a one-stop solutions destination for the renewable energy sector as well as the infrastructure sector. We are a leading player in the renewable sector, catering to solar, wind energy, power transmission industry and related products. We also provide selective products such as crash barriers, telecom towers, among others. In addition, we also provide Fault Rectification Services (FRT) w.r.t. Optical Fiber Cables to various telecom operators, Job work for galvanizing and Solar Installation services as part of our service portfolio. We are also expanding our manufacturing capabilities to meet the growing demand for renewable energy products. Going forward, we plan to augment our product portfolio for use in wind sector, tribular towers, transmission sector, heavy fabrication for the utilization of the green hydrogen, pre-engineering building manufacturing industry, among others. About 75-80% of our products are for the renewable energy sector.

While on the products side the company is serving to the renewable energy space, but what is the company doing to reduce the environmental footprint of its own manufacturing facilities?

We already have 1 MW of solar plant. Going forward, as we expand, we will need more power. So, we are consciously focusing on reducing green energy across our manufacturing facilities.

At a sector level, one concern or challenge faced by renewable energy is seamless supply of energy. What are the developments in this direction with respect to ramping up the battery infrastructure?

Our view is that the commercial viability of the project will be not be as good if we include battery. Battery is needed if we want to supply power round the clock. We have focused on hybrid plants as well. While wind moves from evening to late night and in the morning. On the other hand, solar energy is available from morning till 8 in the evening. So to some extent, renewable power is available round the clock if we combine both wind and solar energy. Batteries, if included, can provided power consistently. Till date, we have not used any battery component in our projects.

Why should retail investors invest in the IPO?

There are several reasons for the retail investors to consider our IPO. Prominent ones among them is our strong leadership team with robust executional capabilities. We have recorded consistent financial growth wherein our top-line has doubled over the past few years.  And growth will remain substantial in FY24 as well. Our profitability has grown consistently. We are confident of staying on course to achieve high growth while maintaining high margins. Our focus on renewable energy is unparalleled. None of our competitors provide all products to renewable energy sector, which has become a strong moat for our company. We are a well-established company with strong growth prospects, thereby making a compelling investment case.

Is the company looking to expand outside of Gujarat to better diversify its presence and reduce its dependence on Gujarat?

It is important to understand that we are a heavy engineering company. If our logistics costs are high, it could impact our competitiveness. We are open to expanding in other geographies, provided such an expansion leads to good margins. But this expansion will be a gradual one.

Top ten customers contributed 71% of revenues in FY23, how are you addressing this risk of client concentration?

Our customers include government authorities, top corporates from India, among others. We have been in all the segments. Our plans to augment our manufacturing capabilities will enable us to add more customers.  Going forward, share of top 10-15 customers in our revenue will go below 50%.

What are the growth strategies of the company?

As we move forward, we will cater more to the renewable energy sector. This is a high growth sector and has huge potential. Solar energy, for instance, has potential of 600GW+ while wind energy has 700GW of potential. Till date in India, we have only achieved 10-12% penetration of the conventional power. So there is a huge gap and we need to focus on bridging the same. Simultaneously, we will also look at growing in other sectors, namely, railways, road and infrastructure.

Give us an overview of the financial profile of the company and the strengths thereof.

Our revenue has grown from ₹39 Crore in FY21 to ₹115 Crore and to ₹104 Crore in the six months ending September 30, 2023. And the second half will be far better for us. Similarly, our EBITDA has grown from ₹6 Crore in FY21, to ₹22 Crore in FY23 and ₹18 Crore in the six months ending September 30, 2023. EBITDA margins have remained in the range of 15-18%. Our Profit After Tax (PAT) stood at ₹2 Crore in FY21, ₹12 Crore in FY21 and ₹11 Crore in the first half of FY24. Our PAT margin should remain between 10-11%. We have always maintained our debt-equity ratio at about 1:1 and our focus is on keeping it that way, which is very healthy compared to any other player in the industry. The RoE has been over 45% and we will try and maintain these levels going forward.

Provide us an overview of the ESG (Environment, Social and Governance) strategy of the company.

Two of our group companies are doing well in green energy and do not have any carbon footprint. At our company, it is our constant endeavour to set up solar and wind plant to neutralize the carbon footprint of our operations. Our CSR company, KP Human Development Foundation undertakes several initiatives such as old age homes, furthering the cause of education, mangrove plantation, upliftment of underprivileged children, setting up library, and so on. Our strong team of Board of Directors comprises industry stalwarts. They keep a constant check of our procedures and performance.