Mr. Vardhan Dharkar, Chief Financial Officer, KEC International Ltd., joined the company in June 2007. Mr. Dharkar is a Graduate in Science and a Chartered Accountant. He has rich experience in various areas of finance, having spent most of his career (1988-2006) with Wockhardt Ltd. in various capacities, progressively growing to become Vice President - Finance in 2002. Subsequently, he joined Dabur Pharma Ltd. as CFO from where he has joined KEC.
KEC International Ltd. is a billion-dollar, global infrastructure Engineering, Procurement and Construction (EPC) major. It has presence in the verticals of Power Transmission, Power Systems, Cables, Railways, Telecom and Water. The Company has powered infrastructure development in 45 countries across South Asia, Middle East, Africa, Central Asia and Americas. It is a flagship Company of the RPG Group. KEC International has a total of 9 manufacturing plants, including 4 cables units in India located in Vadodara, Maharashtra, Karnataka and Dadra & Nagar Haveli and 5 tower manufacturing units, of which three are located in India in Rajasthan, Maharashtra and Madhya Pradesh, one in Mexico and one in Brazil in the Americas.
Speaking with Hemant Maradia of IIFL, Vardhan Dharkar says, “We will be able to manufacture extra high-voltage (EHV) power cables of up to 220 kV capacity at the Vadodara plant.”
Tell us about the Greenfield plant at Vadodara?
The Vadodara plant is a state-of-the-art factory with machineries imported from Western Europe and USA. It is one of the most advanced plants in terms of technology.
This is a Greenfield plant for manufacturing of high-tension (HT) power cables. We have just commissioned phase one of the Vadodara plant. In the next few months we will complete phase two as well. Phase two is expected to start somewhere in September/October.
What will be the installed capacity at Vadodara?
The plant has annual production capacity of approximately 1,800 kilometres of cables after completion of phase one. On completion of both the phases, the total annual production capacity will be ~4,000 kilometers of cables.
Once completed, we will be able to manufacture extra high-voltage (EHV) power cables of up to 220 kV capacity at the Vadodara plant. The plant will also have capacity to manufacture EHV cables of up to 400 kV capacity.
Today, we manufacture cables of up to 132 Kv, for both telecom and power sectors. We will now be able to scale this up to 220 Kv.
What has been total investment into the Vadodara plant?
Total investment into the Vadodara plant, once it is completed will be ~Rs 1.75bn.
What made you pick Vadodara for the new factory?
Gujarat offers good benefits in terms of location, uninterrupted power supply, availability of skilled manpower and market for the finished products.
We also have a plant in Silvassa.
Do you plan to pump more money into the Vadodara plant?
At this point of time, we don’t have any plan for additional investments into the Vadodara plant. However, there is scope for further expansion.
What will be the capex in FY13?
In FY13, our capex will be ~Rs 750mn. Generally, our capex has been in that region.
This will be directed towards project equipment and balancing equipment at project locations.
What impact do you see from the Vadodara plant on your financials?
Better cost structure will help us improve our margins. Secondly, our ability to manufacture high-capacity EHV cables of up to 220 kV will also help us improve margins.
What is the total order book at this stage?
The order book is slightly better than at the start of the fiscal year 2012-13. In terms of order inflows, the first quarter has been good. We have received orders from across segments and geographies.
We started FY13 with an order backlog of ~Rs 82bn.
In the Transmission segment, we recently bagged orders in India and Sri Lanka. Orders also came from Power Grid Corporation of India Ltd.
Projects are under execution in India, Kazakhstan and also in Africa. We also received orders for underground optic fibre cable in Kenya.
Whole of Africa we have had some orders under execution at some point of time or other. We expect business to do well in Transmission and other segments in this continent.
Orders are coming in at regular intervals across sectors and geographies. In each month of the first quarter we have received good orders.
What potential do you see in SAARC nations?
Contribution of SAARC countries to our total order book has been steadily improving. I think SAARC countries should be contributing somewhere around 8-10% of our total order book. That is a significant improvement in the last one year. Big orders are coming from Sri Lanka, Bhutan and Bangladesh. We have also received orders from Afghanistan.
We are not present in Europe, but both in North America and South America we have been building good presence in the last two years. Particularly after the acquisition of SAE Towers, 15-20% of our order book comes from that part of the world.
What about the Middle-East as a market?
We have a strong presence in the Middle-East for the last 10 years or so. Projects are continuously under execution in Saudi Arabia, UAE and other GCC countries.
There is a good potential in the Middle East. KEC International, with its strong presence will do well in future also in that part of the world.
What is the break-up between Transmission and new segments?
The Transmission and Non-transmission segment mix is ~70:30 as of today. Over a period of time, it should be 65:35.
Margins in the Transmission business are better than the newer segments. In the new segments, we still do not have pre-qualification. Naturally, it has its implications on my ability to bid and win contracts.
But, over a period of time, margins will improve in the new segments too, as we keep adding to the pre-qualification base.
In the last four years, we have entered Power Systems, Cables, Railways and Water. Our focus is to consolidate these businesses and scale them up gradually.