Jun 1 2016 | Q&A

Vimal Kejriwal, MD & CEO, KEC International Ltd

The thrust on this sector is steadily improving which has led to scaling up of investments and has unfolded a plethora of opportunities for players like us. The year saw a series of reforms including revival plan for state distribution companies with UDAY. The UDAY scheme is expected to improve operational efficiencies of DISCOMs. This in turn will translate into reduction in the cost of power as well as reduction in interest cost of DISCOMs through alignment with state finances.

Vimal Kejriwal, MD & CEO, KEC International Ltd
shares his views with Sandeep Sharma about his company, core competencies, activities undertaken, projects bagged, major clientele, ongoing projects, business in FY2015, strategy to capture power sector opportunities, and challenges before the power sector players. Edited Excerpts…

Tell us about your company, objectives and core competencies. What kind of activities do you undertake for the Power sector including the renewable space?
We are a USD 1.4 billion global infrastructure EPC major and a World leader in Power Transmission EPC space. We are present in five key verticals of Power Transmission & Distribution, Cables, Railways, Water and Solar. Our strengths lie in the areas of Designing, Manufacturing, Supply and Construction of Turnkey Projects of Power Transmission lines of voltages up to 1200 kV, in setting up Sub-stations and Power Distribution Networks, Optical Fibre Cable (OPGW) installations, Power, Telecom and Control Cables and turnkey Cabling solutions, turnkey railway infrastructure, water infrastructure& renewable energy projects.

In the renewable space, we undertake Solar EPC projects. We have already commissioned four PV ground mount projects and around thirteen roof top projects. During the last fiscal our solar business witnessed an order intake of Rs 130+ Cr. and going forward we expect it to be a substantial revenue contributor for KEC.

How was the FY2015-16 in terms of projects bagged, business generated, and growth achieved in both domestic and international markets?
FY16 was a good in terms of projects bagged and business generated both in the domestic as well as international markets. We had an order intake of Rs. 8714 crore during FY16 as against Rs. 8223 crore in FY15, a growth of 6%. Our current order book including the new orders which we won in April is around Rs. 10000+ crore and we are L1 in significant value of tenders. The order book breakup is roughly 50:50 in terms of domestic and International, the tilt is slightly more in favour of domestic.
Speaking of performance, we have consistently delivered a significant improvement in our margins over the last few successive quarters reflecting a strong performance in the face of challenging global headwinds. For Q4 FY16, our PBT is up by 32%; at Rs. 132 crore in Q4 FY16 from Rs. 100 crore in Q4 FY15 and our EBITDA Margin at 8.7% is the highest in last 19 Quarters. We are extremely pleased with the turnaround witnessed in our SAE Business.
Underlying our efforts on project execution front, we achieved accelerated project delivery for as many as 7 projects ahead of its schedule completion time both in India and Overseas. In addition, building on to our success in the domestic substation space, we expanded our presence in the International Substation arena as well.

Who are your major clientele and ongoing projects in the power sector?
On the T&D front, in India, apart from PGCIL and SEBs we have worked for private developersas well. In the international arena, we work with major Utilities across developing, emerging and developed Nations.
On Cables front our clientele includes industrial consumers as well as utilities and telecom service providers. In addition, a cables manufactured by us are also exported to a number of countries.

What's your strategy to capture power sector opportunities in the medium term?

We intend to capitalize on our strong industry fundamentals, excellent project management &manufacturing capabilities and well maintained &nurtured vendor relationships to tap emerging opportunities in existing as well as newer geographies. As part of our growth and de-risking strategy, we continuously explore and enter new regions every year. More than 50% of our business consistently comes from outside India. For FY17 we intend to ensure faster and sizeable growth in our infrastructure business including railways, solar, Substations, Underground Cables and Cabling business in addition to achieving progress on our core business front.
We believe in continuously raising our benchmark and strive towards enhanced levels of excellence. We understand that it is necessary to re-invent and innovate. During 2014-15, we underwent an organization wide transformation exercise aimed at further enhancing our project management and execution capabilities. At this let me tell you that, PGCIL for the third consecutive year has appreciated our work by conferring upon us three of its most coveted awards. We have once again been bestowed with the highest honour, the “Best Transmission Line Contractors award” in the category of contractors who are executing more than 15 projects. Apart from this, we have won an award for “Safety” for institutionalizing best safety practices in KEC and runners up trophy for admirable “overall performance demonstrated”.
With proven track record both in the Domestic and International Markets we are well poised to capture emerging opportunities in these regions.

What's your take on the initiatives required at the Government level to improve Power Transmission infrastructure in India?

With gradual developments transpiring in this space, the numerous initiatives undertaken by the Government on this front appear to be encouraging.
The thrust on this sector is steadily improving which has led to scaling up of investments and has unfolded a plethora of opportunities for players like us. The year saw a series of reforms including revival plan for state distribution companies with UDAY. The UDAY scheme is expected to improve operational efficiencies of DISCOMs. This in turn will translate into reduction in the cost of power as well as reduction in interest cost of DISCOMs through alignment with state finances. With power being currently available at low rates the demand for power will rise, leading to an increase in infrastructure requirement. More so, if the cost of power reduces the DISCOMs will also want to supply more. All of this is expected to have a positive impact on the sector.
Besides, a slew of measures to expedite forest clearances and RoW issues including revision in land acquisition compensation, focus on expediting project clearances, push towards renewable energy and ease in coal availability have also happened.
Progress also appears to be happening on electrification of all villages by May 1, 2018 which is good for the overall development of the sector.

What are the major challenges before the Power sector players in India?

Right of way and land acquisition are common execution challenges encountered by transmission line construction companies across the globe which result in cost and time overruns thereby leading to delays in project completion schedule. Delay in obtaining forest clearances, as well as getting approvals for railway, Highway and Power crossings etc. wherein traffic blockages/ power shutdown are involved are also a major concerns.
Besides this, constructing lines in difficult climatic conditions and hostile terrain also entails numerous on the site challenges. Having already proven our credentials in executing projects in the most difficult topographies and hostile conditions I would like to elaborate more on this by enumerating some specific instances where we surmounted challenges and delivered excellent results in spite of all odds.
a) Recently we successfully commissioned and charged the 400kV Double Circuit Twin Indo-Bangladesh Cross Border Interconnection, 5 months ahead of its scheduled completion time. Barring logistics and severe monsoon challenges, we completed the project in record 7 months. Besides, apart from this project, KEC also completed two more projects, one transmission and other substation ahead of its original scheduled completion for two State Electricity Boards (a first for both the Boards) thereby setting a record which demonstrates our excellent project execution capabilities.
b) Amidst challenges, we successfully completed the 765 kV Sasan – Vindhyachal transmission line in India. This was a challenging task as it had been on hold since the last three years due to severe Right of Way (ROW) and court cases. Undulated terrain and hard rock surface made tower spotting a challenge and PGCIL had to develop a special design for the foundation of four towers. We had to deploy special task force, jointly with the customer and local administration, to tackle the ROW issues. 32 Metre boom cranes had to be deployed for three DD+25 Metre towers. We successfully completed this project in the timeframe set by the customer.
c) We are currently executing projects at 6 locations in J&K.  Overcoming severe challenges like extreme weather conditions, high altitude and difficulties in logistic arrangements we are successfully executing these projects as per the required timelines. 
d) Another challenging project which was also one of the most outstanding projects executed by KEC was the Haldia River crossing project in West Bengal. The major challenge in this project was constructing transmission tower in mid-river. On account of the high wind velocity helicopters could not be used and instead we used specialized barges and cranes to build the towers. This project powered by our immense technical capability and superb execution skills, established an electric transmission line across the Hooghly River, a vital trade and commerce passage of east India. This is probably the largest ever transmission line tower erected globally and its height is about 75% of the height of Eiffel tower. Details of the project include, supply, erection and stringing of the river crossing section of the 400 kV transmission line between Haldia Power Generation Plant and the Subhashgram Sub-station grid. The height of individual river crossing tower is 775 feet and weight of each tower is around 1,790 MTs.