Nov 1 2017 | Q&A

Vimal Kejriwal, MD & CEO – KEC International Ltd

“The domestic power distribution sector holds significant business opportunities, aided by the increased thrust by the Indian Government on augmenting and strengthening grid infrastructure at both centre and state levels. The government has embarked on several initiatives to ensure and fulfil its dream of providing “Electricity for All”. Huge investments have been planned and massive network interconnectivity is envisaged, including substantial outlays by the State sector for expanding the intra-state transmission infrastructure, in addition to PGCIL’s annual capital outlay. These developments, combined with UDAY, auger well for the sector. “

Vimal Kejriwal, MD & CEO – KEC International Ltd
shares his view with Sandeep Sharma about his company's greatest strengths, achievements, latest projects bagged, expertise in executing large power sector projects, business opportunities in the T&D segment, prestigious solar installations in India, challenges faced by turnkey contractors, impact of GST, and lastly the expected growth in the current financial year.

What do you think are your organisation's greatest strengths?
KEC is one of the key players in Power Transmission & Distribution, with a global footprint in 63 countries and current operations in 37 countries. Apart from our core strength that is Power Transmission & Distribution, the company is present in the verticals of Railways, Cables, Solar and Civil.

Over the last seven decades, we have built a strong foundation, while integrating our business functions to build a robust enterprise that has helped us deliver complex projects for our customers. With a commitment to deliver excellence, we continuously engage in enhancing our capabilities, which has provided us the edge to differentiate ourselves from our competitors across the entire spectrum of our services, including Engineering & Design, Procurement, Manufacturing and Project Management & Execution.

Our execution excellence manifests in our ability to complete complex engineering projects in difficult terrains, extreme climate and hostile/ insurgent environments including deserts, forests, mountains, oceans, rivers and snowfields. We are globally known for our high-quality project delivery, often marked by accelerated delivery, for which we are appreciated world-over. Our clients place their singular belief in us to complete every project, despite the complexities associated with it.

Our Engineering & Design Capabilities create a definite value add by enabling highly competitive and cost effective propositions for our clients that is beneficial to them. In addition to this, our tower designs are customized as per the client’s requirements and facilitate achieving low cost availability of power, thereby, contributing to the development and growth of the Global economy.

We are also the largest globally operating lattice transmission tower manufacturing capacity and the only company in the world to have four tower testing stations, with the capability to test towers up to 1,200 kV.

Digital interventions continue to shape our projects; we are the front runners in technology and innovation. For example, we pioneered the use of Covered conductor technology in India by executing a 66 kV covered conductor project in Bengaluru. This technology has paved the way for zero blackouts in the North Bengaluru region.

What is the most significant achievement of your company in the last one year?
We have closed the last financial year with a very strong set of numbers. We achieved a PAT of Rs. 305 crore, nearly double as compared to the year before. On the back of improved efficiencies, our EBITDA margins have reached a level of 9.3%. The company secured orders of Rs. 12,358 crore, which is almost 40% more than the previous year.

We have significantly expanded our Substation business in both, Domestic and International arena, on the Air Insulated Substation (AIS) and Gas Insulated Substation (GIS) front. The business today, accounts for nearly 15-20% of our T&D business. Last year, as part of our geographical expansion, we entered / re-entered eight new countries.

We have considerably scaled up our Railways businesses. KEC has been in the Railway electrification business for over five decades now. Recently that the pace of electrification has picked up remarkably and it is becoming a substantial part of our overall portfolio. In the last year, our Railways business has more than doubled, and we expect it to double it this year also. We have expanded our portfolio beyond electrification to include composite railway projects related to civil works, track laying, building railway stations, tunnels and bridges and electrification & signaling work, to become an integrated player.


Could you tell us about the latest projects bagged by your company in the infrastructure business segment?
Our Infrastructure business includes Railways, Water and Civil businesses.
Over the last few years, we have expanded our client base to include/Bid for several Railway Electrification works for CORE, RVNL, IRCON and PGCIL. We have recently received orders from CORE and RVNL. In addition to this, we are currently looking at relevant opportunities in DFCCIL projects and the International sector, with a view to expand our business operations. KEC’s order backlog in the Railway business as on June 30, 2017 is more than Rs. 1,300 crore.
In the Water business, we are currently focusing on our existing sewage treatment and water treatment projects, among others.

In the Civil business, we are doing the civil works and construction of factories in the power and cement industry as well as a housing colony; we are exploring opportunities for structural and civil projects in the Auto sector.

How would you rate your company with regard to execution of large power sector projects? Could you share with us good project management practices adopted to serve the project proponent towards achieving smoother execution?
We have successfully achieved before time completion and fast track execution of several complex projects, and have received appreciation from various clients and the industry for the same.

Our capabilities built over years of excellence have prepared us to execute large and complex projects. To ensure smooth execution of our projects, we ensure to undertake various preparatory activities well in advance, such as surveys, design & testing, processing for forest & other statutory clearances, etc.

We have undertaken a detailed process excellence exercise with a global strategy and management team to revamp our entire project management processes, to deliver our projects ahead of time. We have a project academy team, whose focus is to ensure continuous excellence in projects and on-time and ahead of time deliveries.

We have always been cognizant of disruptive innovations shaping the world. The drive to adopt innovative engineering tools and techniques to execute our projects profitably differentiates us from our competitors. We use highly automated construction techniques in our projects to ensure smoother, faster and safer execution of our projects. We are using drones for stringing of power cables and LiDAR to conduct our surveys, apart from using mechanized construction processes such as telescopic boom crane, gin poles, etc.

Further strengthening our processes and driving the next era of growth at KEC, we have partnered with SAP to implement SAP S4HANA to further our processes and serve our clients better.

What kind of business opportunities do you see in the T&D segment?
The domestic power distribution sector holds significant business opportunities, aided by the increased thrust by the Indian Government on augmenting and strengthening grid infrastructure at both centre and state levels. The government and has embarked on several initiatives to ensure and fulfil its dream of providing “Electricity for All”. Huge investments have been planned and massive network interconnectivity is envisaged, including substantial outlays by the State sector for expanding the intra-state transmission infrastructure, in addition to PGCIL’s annual capital outlay. These developments, combined with UDAY, auger well for the sector.

Presently, India has around 3,29,204 MW of installed generation capacity; 3,71,878 ckm of installed transmission line length and 7,49,935 MVA of Substation transformation capacity. The Indian government envisagesan addition of Rs. 1,05,580 ckm of transmission lines and Rs. 2,92,000 MVA of transformation capacity between 2017-2022, necessitating huge investments to the tune of Rs. 2,60,000 crore. This is expected to unfold tremendous opportunities for players such as us.

Apart from this, various disruptions continue to impact the Industry across the entire spectrum; paradigm shifts in demand & supply, change in the energy generation mix, with renewable taking center stage, distributed generation is on the rise, digital, Innovative & mobile technological interventions are being deployed, energy storage mechanisms are being explored, etc. With so much on-the-go, the Industry is set to unleash ample opportunities across the entire value chain.

Could you enlist some of your prestigious solar installations in India?
One of the most prestigious projects that we bagged last year was a 100 MW order from Andhra Pradesh Power Generation Corporation Limited (APGENCO).

We are also one of the largest EPC players in the Solar EPC space with Single Axis Tracking experience. We have successfully deployed this technology for around 67 MW of Solar Power projects. Single Axis Tracking is one of the most advanced and cutting edge value driven technologies for mounting solar photovoltaic panels.

What are the challenges being faced by turnkey contractors in India?
The Industry is faced with several issues related to smooth and timely project execution. Challenges such as early resolution of Right of Way, Land Acquisition, Environment & Forest clearances, end users (like power plants) not being ready, etc. impact project completion timelines. This creates an additional burden on EPC companies by way of time and cost overruns and mobilisation issues. In addition to this, we need to streamline the process of Reverse Auction to ensure the health of the industry. 

What's the impact of GST on your operations?
GST is undoubtedly a positive for the Indian economy, as it simplifies the taxation structure and unlocks restraints put by differential tax rates across states. It is set to open new avenues for procurement, while also enhancing our competitiveness across our markets, given our distributed manufacturing footprint. It provides us opportunities for cost savings, which were earlier lost as non-creditable tax incurred on various miscellaneous expenses.

However, there are certain issues associated with the implementation of GST. There has been some impact on revenues in June and July owing to GST. We expect the disturbance to continue in August, with orders and tenders getting impacted. However, we expect to make-up the shortfall in the coming months. We have noticed an increase in working capital requirement. The solar industry is witnessing a slowdown due to uncertainties pertaining to the tax structure proposed in the tax reform. The tax rate for the Cables business has also increased from 18% to 28%, which has impacted ongoing contracts.
 
What kind of revenue growth do you expect in the current financial year?
We expect a volume growth of 15% in FY 2017-18.

Going forward, where do you see your company five years from now?
Our Vision is to significantly scale our T&D business, especially Substations to the level of our Transmission business. We want to further strengthen our geographical presence and diversify our business portfolio, especially in Brazil and Latin Americas.  In our solar business, we want to be the leaders in adopting leading edge technology and expand the business within the country and internationally.

In the Railways business, we want to strengthen our presence in DFCC projects, Metro projects and in the international space.

We are also looking to significantly ramp up our civil business, in which we have ventured recently, with a focus on Residential, Industrial and Commercial projects.

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