KEI Industries (NSE:KEI) Q2 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to the KEI Industries q two FY twenty seven earnings conference call hosted by Numama Institutional Equities. As a reminder, all participant lines will be in a listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to mister from Nuwama Institutional Equities. Thank you, and over to you, sir. Yes. Thank you. Good afternoon, everyone. On behalf of Newmarva Institutional Equity, we are glad to host the senior management of KEI Industries Limited to discuss the q two earnings. We have with us mister Anil Gupta, chairman cum managing director of the company Mr. Rajin Gupta, Executive Director of Finance and CFO.

1:00 We'll start the call with the opening remarks from the management and then move to Q and A session. Thank you, and over to you, sir. Thank you very much. I'm Anil Gupta, CMD, KEI Industries Limited. Thank you for attending this conference call. I'll give a brief of quarter two of twenty twenty six-twenty twenty seven financial year. So net sales in Q2 of FY twenty twenty seven is INR3776 crore. So we have achieved a growth by 38.52%. However, the total wire and cable sales in Q2 has grown by 39.5% against previous year same period.

1:47 During Q2 FY twenty twenty six, twenty seven, operating margin is almost at par at 9.97% against 9.88% previous year same period. EBITDA in this quarter is INR401 crore against INR311 crore last year, which the margin EBITDA margin over net sales was 10.62% in this quarter. The growth in EBITDA is 28.69%. Profit after tax this quarter is INR 262.45 crore against INR 203.51 crore in last year. Growth in the PAT is 28.96%. Profit after tax oblique net sales margin is 6.95% versus 7.46% previous year same period.

2:41 Domestic Wire and Cable sale is 3,184 crores with a growth of 46%. Export sale in this quarter is INR $4.93 crores against INR $4.72 crores last year. We have very good order book position from overseas market, particularly United States. We are quite hopeful that in coming quarters, exports will grow substantially. Total EHV sale this quarter is INR217 crore against INR172 crore in the previous period last year. EPCCL is INR 46 crore against INR 47 crore. So stainless steel wire sales is INR 51 crore against INR 53 crore previous year same period.

3:36 Domestic institutional wire and cable contribution is that means B2B sale is 26% contribution in the overall sales. Sales through B2C sale against distribution network is 59% and contribution of export is 13%. And balance 2% is domestic EPC and domestic Taylor sales. For first half of six months in FY 2027, net sales achieved INR 6,961 crores. So the growth in H1 is almost 31%. But however, total wire and cable sales growth is 32% against previous year same period.

4:26 During H1, operating margin has improved to 11.09% and EBITDA achieved is 11.73 against 11.46% in the same period previous year. Growth in EBITDA in first half is 34%. Profit after tax is INR536.59 crore. Growth in the PAT is 34.4%. Domestic wire and cable sales total growth in domestic wire and cable growth is 38%.

5:13 Export sale is INR834 crore as against INR846 crore last year. Total sale of extra high voltage cable is INR403 crore as against INR298 crore last year. The total active working dealers of the company as on September 30 is INR2146. Total order book at the moment in Wire and Cable segment is INR 4,927 crore, EPC INR $2.58 crore and out of this total order book, around INR $9.91 crore are export order.

6:02 External rating, long term rating from KEI India Ratings and ICRA is AA plus and data short term is A1 plus Book value of the company's public equity share is $7.53 as against $6.97 as on 03/31/2026. Cash and bank balances on September 30 is INR $6.98 crore, which includes QIP balance of INR 169 crore. During H1 FY twenty twenty six, twenty seven, company has incurred a capital expenditure payment of INR $40.02 crore, out of which Sanand CapEx is INR3303 crore.

6:52 Till 09/30/2026, total CapEx payment incurred for Sanand is INR1876 crore, another INR200 crore approximately will be spent in balance six months of FY twenty twenty six-twenty twenty seven. Company is expected to incur capital expenditure of approximately INR 600 crores annually for next three to four years. At present, company is having total metal consuming capacity of approximately 183,000 metric ton per annum, including both copper and aluminum both. The planned commercial production of Phase II of extra high voltage cable and HT cable in Sanand will commence by end of March twenty seven.

7:51 Capacity utilized during H1 twenty seven is approximately 77% in Cable division, 64% in Housewire division, 91% in stainless steel wire division and 43% in the Communication Cable capacity. Sanand capacity addition is taking time to ramp up and in coming months, capacity utilization will increase month after month. Also, have sufficient capacity to grow housewire production and sales for next two to three years. Now based on the strong demand in domestic and overseas market, we are hopeful to grow in the current year by more than 25% and in next three to four years by 20% CAGR.

8:38 There is a good demand in both and demand growth in of our wires and cables in data center, power, T and D, renewable energy like solar and wind and also even the thermal power projects now coming up in a big way. Electric vehicles infrastructure, railway electrification, metros, urban infrastructure as well. Also manufacturing new manufacturing projects in domestic as well as in global markets are also attracting good demand. Higher demand is strong in housing and commercial spaces. Thank you very much. This is a brief from my side. I would would like to... Glad to answer your...

9:26 Any queries if you have. Thank you very much. Thank you, sir. We will now begin with a question and answer session. Anyone who wishes to ask a question may press star and then one on the touch tone telephone. If you wish to remove yourself from the question queue, you may press star and then 2. Participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue is sent. We have the first question from the line of Natasha Chen from PhillipCapital.

10:21 Please go ahead. I have two questions. First, on gross margin. Could you explain the Y o Y gross margin decline? Now what I understand is EPC losses, if I take that even as a percentage of gross profit, that explains 80 basis point decline, leaving another 100 basis points. Your commentary on export is bullish. EHV has grown very strongly. B2C growth has been strong. And today morning interview on CNBC also, I mean, DNB said that Ultrabow's entry will not trigger pricing war. And in 1Q, you had said that we'll maintain the gross margin guidance with a further 50 basis point improvement. So could you please categorically explain the 100 basis point decline?

11:07 And second question is on the wires and cables outlook. So if we see copper has been oscillating close to almost $14,800 how do you see this wire and cable market evolving if copper crosses the 15,000 mark? Could there be a dent in demand itself? And what are the key risks that you see standing today in the wire and cable market? Thank you. Thank you, Natasha. I'm Rajiv Gupta. So first of all, just earlier in the earlier call of the first quarter, we maintained that the overall EBITDA margin will be 11%, mainly because the quarter one was not the representative of the margin because of the certain valuation of inventory. So if the valuation increase in the first quarter because of some reason, it has to affect in the subsequent quarter. So because of that, it look like that. But if we compare the whole half year position, you will find the same thing, which we have said earlier also.

12:07 And in the past, if you compare our five years number, our operating margin was close to 10.27% to 11% in H1. So slowly, slowly, it is increasing, and it has reached to 11% now in H1. So we should not compare as we earlier requested for Q1 or Q2. It is an annualized basis. We always guided in the past that annualized basis, the margin will be there. Because the growth is also on an annualized basis because in Q1 or Q2 or Q3, growth may here and there because of certain dispatches or certain inspection get delayed. So because of that, year after year and quarter after quarter, we always guided that the growth rate will be for the full year and the margin will also be for the full year basis because of the valuation impact and everything else.

13:00 With respect to the wire and cable market demand, since last fifteen, seventeen years, in spite of so many new competitors came in, in last fifteen, twenty years, company has grown almost 17%. If we talk of the last three years, we have growth, we have grown more than 18%, 19%. So that kind of history we are maintaining and we are communicating and we are guiding. So whatever we are guiding in terms of the growth or in terms of the margin, keeping in mind the new competition, keeping in mind the geopolitical situation, everything we keep in mind, that's why we give you the guidance.

13:48 So whatever guidance this year, we have upgraded to grow by 25%. So we are still maintaining that we will grow more than 25% because nobody knows that in future copper price will go up or copper price will go down. So whatever conditions at present are available, whether it's the pricing or it's a geopolitical situation or some other environmental or some other political situation. We need to consider each and everything into the aspects. That's how we are guiding. So our guidance is still maintaining that we will be growing at a 25% plus growth rate, and our EBITDA margin will be close to 11%. In our EBITDA, mainly income part is very small. It is not more than it is basically the interest on our FD or some exchange gain or loss, it depend on a quarter to quarter, it is not very heavy amount.

14:44 If we exclude the interest or exchange gain or loss, then another 0.3% or 0.4% we may exclude. So whatever analogy is saying that we will be maintaining 11% EBITDA margin. In the past also, we were saying, in the last quarter, we maintained that 11% to 12% guidance. So that was the range bound guidance because of the Sanand once our Sanand is fixed and the capacity is ramping up and we are going to utilize to 60% to 70%, our EBITDA margin will definitely close to 11%. So that's how we are we have guided and still we are firm on our guidance, whether the competition was there or the competition in future will be there. Export is increasing robust way. And in the coming quarters, the export will also grow. But our growth rate will be depending on the geopolitical situation completion as we repeatedly saying that will be 25% plus and EBITDA margin will be 11%, where we grow from export or we grow from the dealer distributor or we will grow from the domestic institution side. As of now, the pending order position is very, very strong.

15:56 Export order is also very, very strong. So demand has very, very strong and the visibility of the demand is also very strong. Yes, from my side is over. If you have any query, please let me know. Thank you, sir. That's comprehensive. Thank you very much and all the best. Thank you. We have the next question from the line of Aditya Bhatia from Investec. So my first question is on the revenue growth that we saw this quarter. Historically, you've always kind of maintained a very tight range of, let's say, 20, 25% revenue growth. And in first quarter, also, had kind of spoken about keeping revenue in a similar range irrespective of whatever happens to RM prices.

16:49 This time around, we have seen a stronger revenue growth. So should we start thinking that the focus would be on getting volume growth as opposed to anchoring ourselves to a revenue number? Sir, earlier in the past also, we're repeatedly saying that value growth will be there because government makes the budget in value, corporate makes the budget in value, and individual makes the budget in value. So ultimately the value will prevail. Whatever capital we will be having to that extent we will be growing because at present we don't have the concern for the capacity because of the Sanam Phase one started. So capacity is not concerned as long as we have the working capital availability because at present, are running a debt free company. We will be running a debt free company. So we will be maintaining and we will be increasing our top line.

17:43 Sure. So given that we still have a net cash position, will it be fair to assume that revenue growth can be far stronger than what we have seen in the next few quarters as well we have capacity, we have net cash position and realization benefit is likely to persist at least for another one, one point five more quarters. So can we assume a much stronger revenue growth than what we've been we've become habitual of seeing? So you see, at one side everybody is concerning about the new competition. At the other side everybody is also expecting to grow. If we can grow faster and you are expecting we can grow faster, then why there is a concern for that? So basically, because all the things we need to balance because of the balancing, we are guiding for a 25% growth, but whatever we can add, we will be definitely adding in as I said in the past fifteen, seventeen years, our history is available.

18:39 In past fifteen, seventeen years, new companies have come, but we will be able to maintain because of our large customer base position and our large export base position. So the reason why I'm asking a 25% kind of a revenue growth essentially implies a significantly slower revenue momentum in second half versus the first half. That's why I'm kind of trying to get Sir, better for the guidance purpose, it will be 25% plus. But whatever it will be, it will be available in the balance sheet because as you have already seen in the first half, we have grown almost 30%, 31% plus.

19:27 Sure, understood. Because whenever we can add more and if we something lose, then we have to answer. So we need to cautious about guiding. Sure. That's a fair point, sir. Completely understand. My second question is on margins. Wherein only in the last quarter, we have spoken about 11% to 12% margins. This time around, you're speaking about 11% margins. I know it's not a big deal. It's a small kind of a change that we've made. Should we read anything more into this? Is it that margins are likely to be lower than what you were envisaging earlier? And what is really leading to this change? The margin was our guidance was close to 11% for the current financial year because it's the same call we were referring in the month of May, we were at that time also we have said that first we will go to 11% to 11.5%, then we will go from 11.5% to 12%.

20:30 Because as our Sanand capacity will ramp up, the margin will get improved because of the export market, because of the PHV increase, because of the economy of scale. So our guidance is intact. As I said, that 11%, as we said, we are maintaining. And as the panel capacity ramp up, we will be moving towards 11% to 12 Sure, sir. Understood. Thank you so much. Thank you. We have the next question from the line of Kunal from three sixty one Capital. Go ahead.

21:20 Hi. Thank you for the opportunity. Sir, my question was similar to what was asked by your participant. Right? So essentially, what we are seeing is that this year's margin will be around 11%, and margin will slowly move towards 12% because of the various factors that we mentioned. Right? Yes, Kunaljit, you are right. Because the Sanam capacity air, which is ramping up, margin definitely will improve towards the more than 11% side. So because of the current year environment and completion in mind, the 11% EBITDA margin will be there. Sure. Sure. Thank you so much. Thank you. We have the next question from the line of from Kotak Please go ahead.

22:11 Yeah. Hi. Good morning. So one question from my side,. Now as likely, think that no one really knows how corporate prices will play out. Assuming corporate prices stay stable and not believing either going up or going down meaningfully, are you still confident of maintaining a 20% revenue momentum into FY 'twenty eight for the full year? Definitely the CAGR which we highlighted on the basis of the working capital available and the cash flow available, we will grow at a 20% CAGR in future. Even if copper prices remain stable. Essentially, next year we are looking at a more volume growth and less pricing growth, given we will have incremental capacity from Salimba. Is that the way how we should look at? Sir, volume every time we all discuss about volume, but I always keep reminding you that everything sold in different countries.

23:14 No, sir. I'm just looking at the dollar mathematics, the yielding copper price don't really move, essentially 20% price don't move from here, then definitely 18%, 20% volume growth will be there automatically. And if copper price goes down from here, then the volume growth will be higher than that, It is implied, sir. Because in the past fifteen years, when I was saying that 17% CAGR, so few of the events were where the copper price was going down and down and down, but still we were growing at 15%, 17%, even in the downward trend. Absolutely, absolutely. And my second question is with respect to working capital, obviously, half, we saw a decrease, which was an industry wide, not particular to us.

24:02 Do we believe from here on working capital number of days has peaked and we should gradually see that number going down into second half and going into FY 2028? Sir, number, sir, already if you see the debtors number, it is already down. Only the inventory portion because of the new Saran capacity is ramping up, so there the whole inventory will get started because at one time we need to fill the full factory. So because of that, the inventory has gone up. But at the same time, the crater level has not gone up because our cash was available. So we save the interest cost and we use the cash. So working capital is the factor of inventory plus that are minus crater. So we have not increased crater because we are having the cash. So that is not the case of our working capital has increased actually.

24:52 Sir, I understand that. So from I'm looking from here on, do you believe inventory days are stabilized? Sir, inventory days from here, will go down. Perfect. Perfect. Okay. Okay, Rajiv. Thank you so much, and all the best for success. Thank you, sir. Thank you. We have the next question from the line of Anupam Goswami from FUD Life. Please go ahead. Hi, good afternoon, sir. Sir, my question is on the how we have passed on the prices for cables and what's our strategy now, how frequent we can pass through it? Sir, as I said, in last fifteen, seventeen years, price trend was increasing or decreasing trend.

25:39 We have the mechanism under the natural hedge because we are carrying three to four months institutional order book, and we are carrying three to three point five months inventory in factory and in transit. So our inventory and order book is under natural hedge. So old order gets served with old inventory. That's how we are passing on. Whenever we are quoting a new contract, we are quoting on a prevailing market price. That's how we are passing on month after month, quarter after quarter, these prices to institution. In the case of retail, twice in a month, price gets revised either upside or downside depending on the movement of the matter. So practically prices are passed on. Got it, sir. Sir, and next question, if you can throw some light, how the consumer behavior, let's say, if the copper prices stays stable from here or even slightly goes down, do we see higher traction in the volume stocking or so? How do we see from here, both in cables and wires?

26:47 Sir, one thing is very, very simple. When the prices of the copper will go down, the volume will get increased. Prices will go up, the volume will get decreased, but the overall sale value will increase. In the got like financial year 'sixteen, 'seventeen, 'seventeen, 'eighteen, 'eighteen, 'nineteen, the copper price trend was going down and down and down. But our industry was growing at 16% to 17% CAGR. Got it, sir. Thank you. Thank you, sir. Thank you. We will take the next question from the line of Achal Nohade from Nuwama Institutional Equities. Please go ahead.

27:33 Yes, sir. Thank you. Just a couple of quick clarifications. Firstly, EBITDA margin, what you're seeing is including the other income, right, just to clarify? Achal, in our case, in the past also, we have discussed so many times in EBITDA versus operating profit, it's not much different. It is hardly in a quarter INR 15 crores to 20 crores difference is there because of interest on FD or the exchange gain, sometime exchange loss also, sometime exchange gain also. So it is not much difference actually. It is hardly 0.2%. Right, right. No, for the second quarter, sir, the difference was 60 basis points and given... So many times in the past, we have discussed that whenever we are guiding or always we're guiding at EBITDA margin. So EBITDA margin is 11%, operating margin it may be 0.2% slightly less. Because in the last year only, in last two years when the QIP money was there, the income was higher actually.

28:41 But now it is not the case. So interest income will be very, very less actually. Got it. Got it. And in terms of the institutional, the momentum, how has been the uptake? Is there any weakness, slowdown? Or how has the demand scenario in various pockets of the local cable? Actually since last seven, eight years, whenever we are discussing, we are discussing you, you say you are not seeing the demand, you are not seeing the uptake. But every year we say that we are seeing so many upticks because so many projects in the private sector or government sector is on the ground. At present, you see the energy sector is very, very strong, whether it's the renewable, wind, solar, even the thermal, even the nuclear.

29:28 And if you go for the infrastructure projects, whether it's a road, rail, metro, airport, seaport, everything is in the traction the government is investing INR 11 lakh to INR 12 lakh crore. But everything will remain in the value, not will be in the volume terms. That we need to keep in our mind that government makes the budget only in the value terms. You see the expansion in the refinery, expansion in the steel, fertilizer, pharma, even the real estate, whether it's a commercial or it's a residential project, each and every city, there is a construction going on, sir. Because of that, if the GDP is able to grow by more than 7% and there is no estimation that, that GDP will not grow, Unless and until the GDP is growing and there is no indication of GDP will not grow 7%, how we can say that demand will not be there.

30:23 No, no, fair point. I was just trying to check the current trends as to if there is any weakness given the increase in the price of the raw materials, if the raw price increase or decrease, it always passes on. It has nothing to do with our margin. In the last, if you see the latest five year results, you will not find much volatility in the EBITDA margin. EBITDA margin is always was 10% to 10.5%. So now it is moving towards 11% because the new capacity and the new sale is increasing, so economy of scale. Got it. Just a quick clarification. Is there any exchange loss or anything in this quarter and also in 1Q?

31:13 10%, there is an exchange gain. There is no loss. Okay. Can you quantify, sir, exchange gain for 2Q? Can you please just hold on? Sir. What is it for 1Q also, sir, if you have it handy?

32:06 Q1 For first half? Yes. Q1 also is what close to Hello? Yes, yes. Q1 also similar, sir? No. Q1 was very less actually, less than INR 1 crore. Less than INR 1 crore. Okay, okay. Got it, got it. Thank you. Currently, can... Actually, interest cost was higher earlier because of the QIP money. Correct. Now that's not it. It has cost me interest. That's income. Got it. Thank you. Thank you. We will take the next question from the line of Uman Mehta from Kotak Securities. Sir, on exports, you are targeting 17%, 18% salience this year. The first half, we are flagged because of the war.

32:59 But you mentioned about a very strong order book. Two questions there. One is how much is U. S. In your order book of INR 1,000 crores? And second is how do you see exports growth for the full year as of now? Sir, export growth, this almost it is a flat because INR $4.93 crore versus INR $4.72 crore in this quarter. But the export order, which is INR $9.91 crore, it is from The Middle East, from Australia, from America. America order is almost 50% of the order book. 50%. Okay, got it. At the current timing, the America is very, very strong demand, whether it's industry or it is from energy side.

33:44 On both the sides, the demand is very strong from USA. Understood. So from a full year perspective, any guidance you can share in terms of absolute export revenues or growth? First of all, everything if the export increase so much, then little bit decrease in the domestic institution because if the overall growth will remain the same, because we need to be a part of the export retail or institution. Overall growth either from here or from there. Thank you. We will take the next question from the line of from Asian Market Securities.

34:30 Please go ahead. Hi, sir. Thank you for the opportunity. Just a quick question on the CapEx related side. So our CWIP has increased to almost INR 1,300 odd crores as of September. So could you please provide an update on the key projects driving this increase and the commissioning time line and the Basically, the Sanand project is only the driving. By March 2027, our Phase II of VHB and HD cable will commence. So then almost all the CWIT will go towards capitalized. Got it. So just wanted some clarification on the inventory side. So we have seen an almost INR 1,200 crores of increase in inventory in the first half significantly impacting our operating cash flows.

35:17 Could you please elaborate on the key drivers of this buildup? And additionally, when The can we expect the inventory main inventory increase in this Sanam because it's a new plant. So as the capacity is increasing, so at one time, we need to fill the full factory, almost more than INR 600 crores, 700 crores inventory increase only in the Sanam and balance because of the valuation from the existing factory. Copper and price have because of that only. Sir, and when can we expect it to normalize post H2? Sir, it is by the end of the year, it will get normalized to the earlier level. The holding level will remain same by the March 27. Got it, sir. And can you please call out the volume growth for this quarter?

36:06 Sir, volume growth, as I earlier said repeatedly that everything we sold in the value, the government budget is always in the value. And we have the capital constraints, so we can sell only in the value terms, sir. So that's why the value growth is always prevail because balance sheet we make only in the value terms. Got it, sir. Thanks a lot. Thank you. We will take the next question from the line of Rahul Agarwal from IKEI Asset. Please go ahead. Good afternoon, sir. Just a few clarification.

36:51 You said balance sheet inventory should go back to ninety days of COGS by March 27. Is that correct? Yes, is it correct? Okay. Sir, I joined the the call in sales will also increase, Rahul, by that time, the sales will also increase. So again, the holding level will remain same. Yes, sir. I understand that. I joined the call a bit late. I just wanted to understand the reason for the EPC segment, whatever small EBIT loss we have reported. What is the reason for that? Well, EPC, since we are closing down, so now whatever left out job is there because a new job in EPC is not there. So small, small closure issues will be there.

37:38 So it will be like in the first quarter also, there was INR 5 crore loss, in second quarter, 8 crore. So next one or two quarter, the INR 5 crore to INR 7 crore loss will be there because we are almost closing down the EPC. Okay. So full year, we should budget like about INR 20 crore kind of EBIT loss for the full year. And then from next year, there is no EPC. Is that correct? Almost EPC has EPC revenue is close to 1.5% as of now. Okay. Got it, sir. Got it. And just one clarification on exports to the previous participant's question. So first half flat, I understand full year will grow 25%. It doesn't matter whether it's domestic export.

38:23 But this INR $9.90 crores order book will have a finite time line, right? Right. It will be sold within three to four months. So whatever pending order book is almost three to four months, not more than that. Gotcha. So you're saying this entire thousand crores of export order book will get fulfilled in next four months? How many order are there? How many order? Order book will be there, but it will be sold within three to four months. Okay. Okay. Got it. And sir, last question on EHV. After the plant commissions for panels by March, the peak revenue for EHV would be how much? What should be the capacity?

39:10 New capacity additional will be more than INR 1,500 crores to 1,700 crores in terms of value or maybe more depending on the metal valuation. But it will take some time to reach peak. But quarter after quarter from the September quarter of next year, the ASP sales will get increased. Because March, we will start the commercial production. Three months' time, it will take to settle down and for the approval process. So then from the second quarter, the sales will heading of EHP from the Saanen plant. And this is over and above the existing INR700 crores of capacity? Yes, yes, Is that correct? Existing is now INR700 crores, yes.

39:58 Okay. And sir, full year CapEx, you said INR 600 crores every year for the next three years. That is what we should Yes, be looking sir, because we need to increase the capacity to grow by 20% CAGR. So now we have just started the Salarpur. So it will take another two years' time. So their investment will be going. That's how we are targeting and allocating the budget for capital expenditure. And this includes the maintenance CapEx for existing factories? Yes, maintenance CapEx is INR 100 crores to 150 crores, not more than that in all the plants. Got it, sir. You so much. You. We will take the next question from the line of Kevin Shah from Aditya Vedula Capital Institutional Equities.

40:52 Please go ahead. Yes. Hi, sir. Thank you for the opportunity. So my first question is on the volume front. So in the interview today morning, you mentioned that volume 27 will be somewhere around 10%. And which is more conservative than your earlier guidance of 16% to 17%. So can you throw some light wire that conversion and how much? Sir, if you see the volume growth 16% to 17% and price had increased by 50%, this means you are talking of a 67% to 70% sale value growth. Is it right or wrong? Yes.

41:39 Hello? Yes, yes, I get it. So 70% growth is not possible at all, sir, because for growing any company, it needs the working capital. And working capital does not support more than 25% to 30% growth rate. So it is very, very clear, sir. So whatever we will grow, we will grow in a value terms. So that's why we are again and again emphasizing on the value terms because of the capital requirement to grow. And how much of this will be coming from Sanan contribution and what is the current utilization at Sanan? Sir Sanan, as of now, until last month, it reached INR 200 crore per month level.

42:28 Within this quarter, we are targeting INR 150 crore to INR 200 crore per month and third quarter will be close to INR $2.50 crore to INR 300 crore on this type of thing in the monthly basis. And secondly, on the margins, if we compare the Q o Q margin decline. So in Q1, you mentioned that the operating efficiencies, VHV and the retail contribution was the key levers for the margin solid margin trajectory. And if we see even in this quarter, those three levers are intact. So could you help understand the key reasons for the sharp decline in Q o Q margin? Actually, there is no decline. When there was a last quarter call, at that time also I clarified because of the valuation, inventory is high.

43:21 Because of that, the margin was looking like improving. But if the closing is dropped somewhere in the high value, again, it has to adjusted in the subsequent quarter. So that it has adjusted. So if you combine for two quarter, it is average out. It always happens because of the current price fluctuation. So there is no decline. Practically, annualized basis, if you see, there will not be declined, rather it will be increased, whether it's operating profit, which we are talking. And lastly, to get a sense on your strategy in the retail channel, the dealer channel. So if we are seeing an increased additional capacity in the new engines coming in the retail channels. So what are you looking at a strategy to lower channelize your mix between the retail and HP?

44:20 And can we see the retail mix going down from here due to that? Or is there a deliberate approach to that? Or will you be speaking as it goes on? Sir, dealer distributor contribution is already 55% to 60% range, and we will be operating in this range. Because those dealerdistributor are working for us, they will be working for us. And have you seen any pricing changes or any dealer incentive change in the dealer channel? Pricing, it is a continuous process is increasing or decreasing because depending on the metal price, as I said, twice a month price gets revised for the retail, twice a month. So it's a continuous regular normal process, nothing new, nothing abnormal.

45:15 Thank you. Ladies and gentlemen, in order to ensure that the management is able to address all the questions from the participants in the question queue, we request you to kindly limit your questions to two per participant. If you have a follow-up question, please rejoin the queue again. We will take the next question from the line of Rahul Maheshwari from Ambit Investment Advisors. Please go ahead. Yes. Good afternoon, sir. I have two questions. First, if we see from past two, three years, your dealer active dealer count, if you look at this time, you have disclosed that 2,146. And last year, same period, it was at 2,340 something.

46:03 Why the active dealer count has been remained steady state? Have we reached to our full potential in terms of distributor count or the penetration etcetera? Sir, dealerdistributor count is normally in the range of 2,100 And our existing dealerdistributor are few of them, those who are not working, we are closing down and few of the new potential dealerdistributor we are increasing. That's how the number is in the range. And our existing dealerdistributor are working hard for the company. That's how our overall retail dealerdistributor sale in last five years has grown from 40 contribution to now 59% contribution.

46:48 So we are quite satisfied with our existing dealer distributor and they are also very loyal to the company, those who are very Sir, loyal to I got that, that dealer distribution mix is improving. I'm just asking from a penetration perspective that if in India, XYZ is the number of dealer count, have you reached to that potential? That is why on a net basis, it's not on an increasing trend is my question. Slowly, slowly, it is increasing also. But few of the dealers, those who are not selling our product, are also decreasing also. So because of that, the net number is not increasing. But ultimately, the valuable dealerdistributor is increasing.

47:35 Okay. Okay. And sir, these would be your exclusive dealer 2,146? Normally, 15%, 20% of the total dealer count are the exclusive, but balance are the multi brand dealer distributor. They must be selling towards three brands. That's a normal practice of the industry. Right, right. And in terms of serviceability, can we say that how many pin codes are we able to map through these dealer retail touch points, how many we have been able to cross? Almost in each and every city we are available, sir. Each and every city of the country we are here. So just a second question. We are the second largest company of the country for the virus. No, no, no. That's known, sir. We've been tracking for more than twelve, thirteen years.

48:28 So just from a perspective from the peer or the new entrant who has been able to start this business, so just wanted from a reach perspective. Sir, second question from Simon wanted to... Sir, one thing I would answer for the reach point, more than 25,000 retailers are working all across the country and more than two lakh electricians we have been connected so far. Yes, sir, you are asking something. Yes. But this you have reached can you give on an industry basis, sir? That will be really helpful, that how much more potential is there for KEI to grow? It may be double also, sir, in the next five to ten years because the potential is used in the country is so big.

49:19 Okay. Okay. And sir, just last question on Sanand. As you in your initial remarks, you said that ramping up is taking time. But last year, you mentioned that it might take two to three years for full ramp up. Can you give at what year we can see the peak utilization for Sanand? And... 2829. Sir, that guidance is still intact. So in 2829, you will see the peak revenue from there. And how much effect in the range of two to three or better? More than three. So any more than three means, should we take 4x or what kind of because we actually will also... As of as of now, more than three, sir, less than four.

50:11 Best wishes, sir. Thank you so much. Thank you, sir. Thank you. We will take the next question from the line of Bharat Shah from Bharat Shah Capital Ideas Private Limited. Please go ahead. One long range question. We aim to grow it about 20% plus over next four to five years. So should I assume that our operating profit pool growth would be ahead of that top line number?

50:58 Sir, that was always in the past also. Sir, if you compare past fifteen years, our CAGR growth was 16% to 17%, but our profit growth was close to 24% in the past also, sir. Right. So for the 20% value growth in turnover for next four, five years, what kind of operating profit pool growth one should probably be able to pursue? At least 2% to 4% higher than the top line. And profit after two will it be fair to assume will be little higher than the operating profit growth? Overall, the profit after tax will be higher, 3% to 4% because of the interest and our operating margin will also be higher little bit because of some operational efficiency and economy of its scale. So overall profit after tax, you can count that 2% to 4% will be higher than the top line growth.

52:05 Then the top line growth? Yes. So 20 top line growth will mean 23%, 24% operating profit growth and profit after tax would mean probably about 25 So is an tax element also. So the growth below the line, I am talking of the below the line growth basically. I'm not talking of the operating growth. I am talking of the final profit after tax because in the past history when even the interest was there, we were growing 17% and our profit after tax was growing 24%. So, there the difference was higher because of interest, but now the interest cost is less. So, if we grow by 20%, at least profit after tax will grow by 24% to 25%.

52:53 And operating profit growth, should we assume 23%, 24% compared to 20 Operating profit, I cannot comment sir as of now, because I have not calculated because in the history I have calculated on the top line and the bottom line. So accordingly, have given you the answer. Okay. And what should happen to return on capital employed, which was last year, obviously, reduced Return due on capital and return on equity, as it was in the history, ROE was 19% to 20% and ROCE was close to 23%, 24%. From the next year onward, you will see that kind of ROCE and ROE. Thank you. Because when the Sanand will get completed and the top line will be from there, so the same will get reversal, sir.

53:45 Okay, perfect. And the CapEx you mentioned, but I can't really get that number. Regular maintenance CapEx will be 100 to two fifty and what is one and fifty and another $4.50 to 500 will be for the new CapEx, infill CapEx. Over next four, five years. Yes, sir. Because we need to continue growth and we need to continue CapEx also, sir, because we need to invest two point five year advance. Okay. And one last thing, since we conceive our business plan in terms of the top line, and as you have many times articulated that there may be underlying raw material price fluctuations, so volume growth also may reflect synergistic effect.

54:43 But the best way to conceive overall business model is in terms of the top line. And if that be the case, should we really focus on operating margins that we talk about that it is likely to be 11% current year end? Over time it will improve to maybe say 12% because that operating profit is really an outcome of this model. Therefore, it not be better to focus on top line is one number and operating profit growth is a percentage growth is another number rather than focusing unduly on margin percentage? Sir, you are right. As we said that even in the current year, earlier guidance was 20% because of the capacity available and capital available, we reached to the line where we have set the target of 25% plus.

55:45 And in first half, we have already grown by 30%. And in the margin, we have guided that because of the economy of scale, because of the current scenario and the mix of the retail has increased and export has increased, our EBITDA margin earlier was close to 10.5%, which we have guided for 11%. So both these things are intact. In future also, 11% margin will go towards the higher range. And ultimately, for us as a company, the availability of the cash profit, profit after tax plus depreciation. So profit after tax will be closely in the range of 7% to 7.5%. So that will be available for our future growth. That's how we measure our growth actually, sir.

56:32 That I appreciate. My simple question is, for value creation in a business, what is important on a long term is how the overall business is growing, how our profits are growing and how our cash flows are growing. And along with that, whether return on capital employed, capital efficiency is improving or not. Margin is just an outcome in that number. Margin is improving, sir. Earlier margin was 10.5%. It has improved to 11%. And we are guiding also for future was the financials get commissioned fully. So in the next year, another zero five percent margin will get improved.

57:20 To interrupt in between, Mr. Bharat. No, need to complete this question, please. Basically, margin percentage is not a particularly important factor in value creation. Value creation resides in top line profit and cash flow growth along with the capital efficiency improvement. So margin is merely a noise rather than any meaningful signal. And therefore, unnecessarily too much discussion and too much focus Sir, on are right, but sir, KEI, most of the analysts, they are always talking of the margin that increased margin or decreased margin, but they are so that's why we need to focus and because they are focusing on the margin. But otherwise, you are right, because as a company, we finally need the cash flow and the efficiency of the capital. That's why we always focus whenever we make our business plan, we always make that how much cash is available with us, that is profit after tax plus depreciation.

58:30 After paying dividend, that cash is available to us. So we, as a company, always focus on that only, sir, which you are guiding us. Okay. Thank you, Rajivji. Thank you, Anand. Thank you for all your questions. Thank you. You. Thank you. We will take the next question from the line of Darshan from Jefferies. Please go ahead. Mister you may proceed with the question. Hello. Am I audible now? Yes, sir. Yes.

59:16 Thanks for the opportunity. I just had one clarification regarding the margins. So earlier we were guiding for 11% to 12%. Now we are guiding for 11%. So is it that we are being conservative in guiding towards the lower end of our previous guidance? Sir, no confusion. There The guidance is 11% to 12%. 11% to 12% was also for the next financial year. In the last call also, if you read our call, we said that first we will go from 11% to 11.5%, then we will move to 11.5 to 12%. Guidance is intact. Sometimes there is a little bit confusion with the understanding or whatever we are we want to communicate, maybe it's a little bit difficult that again, I am saying that our guidance for growth will be 25% in value terms.

1:00:11 For the margin, our guidance will be EBITDA level margin will be 11%, 11% to 11.5% because when the Sanan is going to complete by March 27, it will move first from 11% to 11.5%, then 11.5% to 12%. Because until twenty twenty four, twenty twenty five, our margin was 10% to 10.5%. 25%, 26% even, the margin was close to 10.5% operating margin. So now this margin is improving and it will improve. So guidance is intact. So please take note that the guidance of EBITDA margin 11% to 12% will be completing in 2728% to financial year.

1:01:01 Got it, sir. Got it. Thank you so It will not be, sir, quarter to quarter. Whatever we are saying, it is an annualized basis. Once again, I am requesting to all of you, sir. Got it, sir. Thank you. Thank you so much for the clarification. So there's no guidance. It. Thank you very much. Ladies and gentlemen, with that, we conclude the question and answer session. I now hand the conference over to the management for the closing comments. Over to you, sir. So thank you very much, thanks for this interactive conference call. If you still have any further questions, please reach out to us. Thank you. You very Thank much to you, members of the management.

1:01:50 On behalf of Novo Ama Institutional Equities, we conclude this conference. Thank you, everyone, for joining with us today, and you may now disconnect your lines.