KEC International is an infrastructure engineering, procurement, and construction (EPC) company. In recent years, it has increased its orders across a portfolio of segments. Specifically, KEC International MD & CEO Vimal Kejriwal discussed the expansion in technologically enabled railway projects. Throughout the year, order intake has exceeded ₹3,000 crore and is 30% higher than the corresponding period in the previous fiscal.
Transmission and Distribution (T&D) Business
The Transmission and Distribution (T&D) business of KEC International secured orders for undertaking projects in India, East Asia Pacific, and the Americas region. These orders comprise a transmission line and substation order from India, another transmission line order from Malaysia, and towers, hardware, and poles from America.
Railways Business
The Railways business obtains orders in technologically advanced and normal segments of the Indian market. For instance, KEC International got its first-ever order in composite gauge conversion works and the formation of a power supply system for Bengaluru Metro Rail Corporation.
Financial Outlook
On a consolidated basis, the net profit of KEC International in Q4FY24 increased by 110.3% to ₹151.75 crore against ₹72.17 crore in Q4FY23. Net sales were ₹6,164.83 crore, showcasing a healthy year-on-year growth of 11.6%.
Major Risks for KEC International
KEC’s business is working capital intensive and this is likely to exert pressure on liquidity and thereby financial stability. KEC has acceptable debt protection ratios, and high levels of debt may be dangerous if they are not well controlled.
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The pricing of commodities affects the cost of projects and profitability in the company hence remains a risk in its operations. KEC is exposed to fluctuating currency exchange rates because it has operations in various countries across the world. The general environment in the infrastructure segment is unforgiving, and KEC has to make strategic decisions to sustain itself. As an EPC firm and power transmission company, there are environmental issues such as energy loss during transmission and waste production with which KEC deals.
Acquisitions by KEC International
KEC International has successfully closed the deal to acquire a 100% stake in Spur Infrastructure Private Limited in September 2021 for an enterprise value of ₹62 crores. The subject of this paper, Spur Infra, is an Indian EPC company that focuses on cross-country oil and gas pipelines and city gas distribution networks.
In the last three years, Spur Infra has been showing annual sales of more than ₹100 crores and its profitability is also good. The order book contains orders from large flag customers roughly amounting to ₹ 600 crore. This strategic acquisition reinforces KEC’s growth model, as it enables them to expand into related segments and capture opportunities in the oil and gas pipelines EPC sector, both domestically and globally.
Conclusion
The strategic orders and financial status of KEC International also put it on the right track for further growth in the infrastructure segment. The cables business also secured contracts for the delivery of the conductors and cables.
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