KEC International welcomes infra push in Budget after tough third quarter

Engineering and construction company KEC International on Tuesday had reported an 81.2 percent fall in its quarterly profit, affected by elevated costs. The company’s consolidated profit stood at Rs 17.6 crore for the quarter ended December 2022, against a profit of Rs 93.6 crore in the year-ago period. The sub-contracting expenses soared 55 percent and cost of materials consumed increased 27 percent leading to a total increase of 35 percent.

KEC International's MD & CEO Vimal Kejriwal in interaction with CNBC-TV18 welcomed the Union Budget announcements terming them positive for the company as announced outlays have to be converted into specific projects, and tendering.

"By the time this number gets translated into orders for us, it will probably be quarter three in terms of the financial year. So this will help us in maintaining our run rate for FY25," he said.

The company's revenue from operations for the period under review rose 31 percent to Rs 437 crore.

Kejriwal said the third quarter will start turning around at the margins. "Our margins are slightly better than quarter two. So quarter on quarter we'll probably get a 75-100 basis points (bps) bump up in the margin. So quarter three next year should be a normal working year for us in terms of margin."

On working capital, he said, "as far as working capital is concerned, in the last six months we have brought down our net borrowings by Rs 450 crore. We have promised Rs 500 crore by March end we are pretty confident that we will reach there."

Kejriwal stated that interest cost has been a problem for the company. "Although the borrowings are going down, the interest rates have gone up. So we were 4-4.5 percent in India, we are now paying 7.5-8 percent." He added that the company expects that despite a 15 percent growth next year, the interest costs in absolute term will not go up. "The percentage today, which was at 3.4 percent to revenue for this quarter should probably come down to about 2.5 or 2.6 percent next year. So there will effectively be 80 bps reduction in interest to revenue."