KEI Industries Ltd Q3 2022 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Rahul Agarwal - InCred Capital - Analyst : Yeah. Hi, good afternoon and thank you for the nice presentation, Anil-Ji and Good afternoon, Rajeev-Ji. Sir, quick questions. Firstly, to start with, I understand copper was volatile and hence margins were soft for the quarter. Could you help us understand how does fourth quarter look like? How the start to January and some price hikes are pending here to be taken in fourth quarter? Could you help understand some color on this please? That's the first question. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 28, 2022 / 6:30AM, KEIN.NS - Q3 2022 KEI Industries Ltd Earnings Call

Question: Rahul Agarwal - InCred Capital - Analyst : So margins go back to 11% in fourth quarter? Is that understanding correct?

Question: Rahul Agarwal - InCred Capital - Analyst : Got it, sir. sir, second question was we're looking at achieving very good scale on the housing wire side. We're almost running at INR1,600 crore yearly run rate now. How has the pricing behavior been in the market for KEI for housing wire versus Havells, Polycab, Finolex. Are we -- now the discount versus these brands have reduced, are we at par? Any color, please? (multiple speakers)

Question: Rahul Agarwal - InCred Capital - Analyst : Got it, sir. Sir, thirdly on the order book. So obviously, as you said dealer sale doesn't have an order book and that is about 40% of top line. So if I remove that sale from annual sale, we're talking about INR3,000 crore of sales coming from nondealer and that is equivalent to -- the average order book has been remaining in that range of INR2,500 to INR3,000 crore. I just wanted to get your help on to understand this number that, is that decent enough to run a 12-month order book or you would have -- is this number going to go up or down going forward? Because my understanding is housing wire sales growth is much higher than the nondealer company. So obviously, this numbers will stay here. So could you help me understand this?

Question: Rahul Agarwal - InCred Capital - Analyst : Got it, sir. And lastly any expectation from the budget as in anything specific on cables and wires in terms of duties, et cetera? Or is it largely going to be again supporting and boosting government and private sector CapEx? That's my last question. Thank you.

Question: Rahul Agarwal - InCred Capital - Analyst : Perfect, sir. Thank you so much. All the best for the coming quarter. Thank you for answering. I'll come back in the queue.

Question: Lavina Quadros - Jefferies India Private Limited - Analyst : Yeah. Hi, sir. Congrats on a good set of results. I just want to understand there was some delay in offtake, I mean your working capital on the inventory side has been impacted a little bit. So could you just explain if there was any delayed offtake on deliveries and reasons for it? Thank you.

Question: Lavina Quadros - Jefferies India Private Limited - Analyst : Okay. Sir, because of the environmental issues, what was it exactly that impacted (multiple speakers)?

Question: Lavina Quadros - Jefferies India Private Limited - Analyst : Okay. So that should (multiple speakers) --

Question: Lavina Quadros - Jefferies India Private Limited - Analyst : Understood. Sir, lastly, the interest costs break up please for the quarter?

Question: Lavina Quadros - Jefferies India Private Limited - Analyst : Okay. Thank you, sir.

Question: Amit Mahawar - Edelweiss Financial Services - Analyst : Thank you. Anil-Ji, Rajeev-Ji, congratulations on great retail-driven growth. Sir, I just have one question. Sir, technically, if you see the way we are going, we will be crossing retail revenues, especially on house wires around INR2,000 crore by maybe '24. That should translate a significant cash flow in our business. And if I take on a three-year scale, am I right in my understanding that generally we should be able to clock more than INR250 crore to INR300 crore-plus worth of operating cash flow average in the next three years. That's my first question, sir. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 28, 2022 / 6:30AM, KEIN.NS - Q3 2022 KEI Industries Ltd Earnings Call

Question: Amit Mahawar - Edelweiss Financial Services - Analyst : Yeah. Thanks, Anil-Ji (multiple speakers) --

Question: Amit Mahawar - Edelweiss Financial Services - Analyst : Sure, sir. Sir, maybe one more question, if Anil-Ji can help. Sir, typically beyond our cable expansion, which I'm sure should happen in the next two years, generally beyond one to two years, how will you think of the retail franchisee, maybe around once you attain a critical mass in wires, you will think of FMEG but am I right in my understanding that maybe beyond '23 -- maybe beyond '24 is where we will have a bigger FMEG plan. Before that anyway it's not feasible? Am I right, sir?

Question: Amit Mahawar - Edelweiss Financial Services - Analyst : Thank you, thank you very much, sir. Maybe one last (multiple speakers) --

Question: Amit Mahawar - Edelweiss Financial Services - Analyst : Yeah, and if I exclude the pricing impact, it is still more than 30%, 35% in value growth, sir? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 28, 2022 / 6:30AM, KEIN.NS - Q3 2022 KEI Industries Ltd Earnings Call

Question: Amit Mahawar - Edelweiss Financial Services - Analyst : Volume growth, sorry?

Question: Amit Mahawar - Edelweiss Financial Services - Analyst : Okay, okay. Sir, maybe one last question from my side. Of the current salesforce that we have for branded wires, what percentage is there in northeast and in south in general?

Question: Amit Mahawar - Edelweiss Financial Services - Analyst : Yeah, sir, I saw that. My question is different. Basically in the current sales team, northeast and south would account for what percentage of the manpower deployed for marketing and dealer distribution?

Question: Amit Mahawar - Edelweiss Financial Services - Analyst :

Question: Naman Parekh - NSS Securities - Analyst : Am I audible?

Question: Naman Parekh - NSS Securities - Analyst : Thank you for the opportunity. Good afternoon one and all. My question is regarding the CapEx plan for the company like how much CapEx has been done for the quarter?

Question: Naman Parekh - NSS Securities - Analyst : Okay, thank you so much. Can you let me know the amount of the CapEx that might be done in the -- like 15 to 18 months' period (technical difficulty)?

Question: Naman Parekh - NSS Securities - Analyst : Okay. Thank you so much for answering.

Question: Harshit Kapadia - Elara Capital Plc - Analyst : Thank you for the opportunity and congratulations for good set of numbers, Anil sir. So just wanted to check with you. Sir, in terms of margin, we've seen a quite deterioration on a YoY basis (inaudible) QoQ basis. Can you share in terms of product segment wise, what are the margins that you have clocked that would help us to understand how fast can you be able to recoup the margins in the coming quarter.

Question: Harshit Kapadia - Elara Capital Plc - Analyst : Sir, can you say what kind of a price hike you have taken in Q3 for the business segment (multiple speakers)?

Question: Harshit Kapadia - Elara Capital Plc - Analyst : In terms of retail, yes.

Question: Harshit Kapadia - Elara Capital Plc - Analyst : Okay, and just final question on the expanding your wire segment into different electrical business. So can we expect any launch in the next financial year in terms of product categories, and then you can scale up your business. If you can share some insights on that will be helpful.

Question: Harshit Kapadia - Elara Capital Plc - Analyst : Thank you, Rajeev sir, for these extremely insightful answers. Thank you, Anil-Ji and wishing you all the best.

Question: Shrinidhi Karlekar - HSBC Securities & Capital Markets (India) Private Limited - Analyst : Yeah, hi, and thank you for the opportunity and congratulations on good set of numbers. Sir, a couple of questions from my end. Firstly, on sir, the guidance, we see quite a strong guidance over medium term. And if I see next year, a lot of this growth that you're guiding has to come from volume growth. So just wondering where are we drawing confidence in terms of this growth.

Question: Shrinidhi Karlekar - HSBC Securities & Capital Markets (India) Private Limited - Analyst : Fair enough, sir. Thank you for elaborating on this. And sir, on this dealer and distribution network, would it be possible to throw some color on what this number could be from current level of 1,700 that you have. And sir, second is some of your peers, major retailer reach, okay, a number close to lakhs or some company it is 150,000 (multiple speakers) do we measure that number?

Question: Shrinidhi Karlekar - HSBC Securities & Capital Markets (India) Private Limited - Analyst : Fair enough, sir. And sir, couple of more questions if I may.

Question: Shrinidhi Karlekar - HSBC Securities & Capital Markets (India) Private Limited - Analyst : Yeah, so on the retention money, sir, would it be possible to throw some light on how it has progressed? Is it as per your expectations?

Question: Shrinidhi Karlekar - HSBC Securities & Capital Markets (India) Private Limited - Analyst : Fair enough, sir. And last one if I may, sir. Rajeev sir, can you update us on how much of our retail business is already under channel finance and how much of that channel finance distribution business is with recourse? And yeah, those two numbers.

Question: Shrinidhi Karlekar - HSBC Securities & Capital Markets (India) Private Limited - Analyst : But sir, how much -- yeah, that's helpful, sir, but how much is as of now business (multiple speakers) --

Question: Nirav Vasa - Anand Rathi Financial Services Limited - Analyst : Hello, sir, and thank you very much for the opportunity. Sir, my question pertains based on the order backlog that we have, what percentage of order backlog is protected with price variation clause?

Question: Nirav Vasa - Anand Rathi Financial Services Limited - Analyst : And sir, what kind of price hikes have been taken in first nine months and what kind of price hikes are you planning to take in fourth quarter for the retail channel? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 28, 2022 / 6:30AM, KEIN.NS - Q3 2022 KEI Industries Ltd Earnings Call

Question: Nirav Vasa - Anand Rathi Financial Services Limited - Analyst : So effectively if I can say that the gross margin compression that we have seen in third quarter in nine months FY22 can be attributed mainly to the institutional business which are fixed price in nature and will have been executed in third quarter with high commodity prices?

Question: Nirav Vasa - Anand Rathi Financial Services Limited - Analyst : Thank you, sir. My queries have been answered.

Question: Devang Patel - NAFA Asset Management - Analyst : Hi, sir. What is the volume growth we have seen for the cables and wire business in Q3 and nine months on a YoY basis, if you can give that please?

Question: Devang Patel - NAFA Asset Management - Analyst : And secondly, what is our aspiration levels for the EBITDA margin, once our retail share is 50% in a few years. Will we be reinvesting higher margins into marketing for new products on the FMEG side?

Question: Devang Patel - NAFA Asset Management - Analyst : Sir, and overall (multiple speakers) --

Question: Devang Patel - NAFA Asset Management - Analyst : Are you saying that overall EBITDA margin therefore will increase to 12% or only on the retail side, you're saying it will increase by 1%.

Question: Devang Patel - NAFA Asset Management - Analyst : Overall?

Question: Devang Patel - NAFA Asset Management - Analyst : Okay, that's all from my side. Thank you.

Question: Rahul Agarwal - InCred Capital - Analyst : Yeah. Hi, thanks for the follow-up. Sir, I wanted to discuss a thought. Being debt-free is obviously great. I mean, as you said, about 1, 1.5 years, you will be debt free but given the term loan rate for project debt today, for a size of CapEx you're looking for and based on your credit rating, my sense is it will be lower than 7%. Is it possible to retain this cash in the balance sheet and look for distressed assets for FMEG or even cable wire assets if available in the country? Obviously, (inaudible) had some impact on MSME and these companies sometimes are also bought for acquiring land assets and -- they have -- obviously, the plants are not attractive enough and they have old machines which are redundant anyway. So any thoughts on the way we are going to utilize our capital and make better use of cash. Just a thought, if you would help understand this. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 28, 2022 / 6:30AM, KEIN.NS - Q3 2022 KEI Industries Ltd Earnings Call

Question: Rahul Agarwal - InCred Capital - Analyst : Sir, I understand that but even after accounting for CapEx, whatever range [mode], we still will have more cash and obviously even after paying all these payables, you got it down significantly now (multiple speakers) even after that, you will have money left with you.

Question: Rahul Agarwal - InCred Capital - Analyst : Okay, sir. So is there -- there's nothing in India which is available which attracts you. Is that -- like (spoken in foreign language) manufacturing.

Question: Rahul Agarwal - InCred Capital - Analyst : No, sir. I was more coming from the land angle. (spoken in foreign language) is that an attraction?

Question: Rahul Agarwal - InCred Capital - Analyst : Perfect, sir. Good to know that. Thank you so much. Thanks. All the best.

Question: Devansh Nigotia - SIMPL - Analyst : Yeah, sir. Thanks for the opportunity and congratulations on great sale up in retail wiring. Sir, just if you can just throw some light on (technical difficulty)

Question: Devansh Nigotia - SIMPL - Analyst : Yeah, sir. Thanks for the opportunity (technical difficulty)

Question: Dhananjai Bagrodia - ASK Investment Managers Limited - Analyst : Hi, sir. Congratulations for good set of results. I wanted to ask you, what -- could you give the capacity utilization numbers please?

Question: Dhananjai Bagrodia - ASK Investment Managers Limited - Analyst : Okay, sure. Thank you.