Railways, among other units, drives Q4 growth of KEC International

“Our order book today in railways is close to Rs 5,000 crore,” he added.

KEC International posted a strong set of Q4 earnings, beating even the escalated expectations.

The execution went very right, especially on the railway front with the push from the government and also on the transmission and distribution (T&D). These are the two drivers which we had in terms of overall growth in Q4.

Extrapolating maybe a difficult job because Q4 normally is around 30-35% of our revenues, so I cannot just multiple it by four.

However, if you look at our orderbook, as on March we had around Rs 17,300 crore of a backlog of orders and around Rs 2,500 crore of L1 (lowest bidder), in fact on May 14, we have announced Rs 1,400 crore of orders.

Therefore, if you add that, our orderbook is now in excess of Rs 18,000 odd and Rs 1,500 odd of L1, so roughly around Rs 20,000 crore figure remains on the orderbook side.

We expect to do around same number, that is 15% at least. But some of the orders are of a longer cycle, especially the railway side. That is why we are bit conservative and saying that we should be growing around 15% at least.

If you look at the order intake for the last financial year, we got orders of around Rs 4,010 crore in all, of which around 67% was what we call composite which is laying of new railway line, station, signalling etc... and 33% was for electrification. TOday, our orderbook in railway is close to Rs 5,000 crore. So that is the number we are talking about railways.

We have a significant role to play in the sense that the states have not build their transmission network. If the power has to go to each household, they will need the transmission lines. Therefore, if you look at our order intake for the year the state board is playing a significant role; earlier it used to be around 15-20% of our India orderbook. Last year, it was almost 60% of our orderbook. So very clearly the transmission rollout in states would be a key to this objective.

I would, today, stick to 15% of our full year average, but I have an orderbook which can push me into higher growth.

Last year, we did 9.3 for the whole year. This year we are at 10%. So there has been 70 bps increase. Right now I am not seeing my margins going up significantly because new areas of railways and civil contribution is increasing significantly.

The other thing is that in these two businesses we are adding a lot of capability. So there is a lot of cost which has been incurred which does not get reflected immediately in the revenue. So in the near-term maybe next two or three quarters I am not seeing change in the margins but maybe after sometime the margins will start improving on an overall basis.