KEI Industries Limited (517569) Earnings Call Transcript & Summary

Good afternoon, dear shareholders, Board of Directors, auditors and scrutinizer who have joined us today in the 28th Annual General Meeting of the company through virtual mode. I'm Kishore Kunal, GM Corporate & Company Secretary of the company, and I have joined this meeting from the registered office of the company at D-90 Okhla Industrial Area, Phase 1, New Delhi - 20. Before commencing the official proceedings, I would like to inform all the attendees about some points. Ministry of Corporate Affairs and SEBI has permitted companies to carry out AGM through video conferencing and other audiovisual modes. As a tradition, your company has always conducted Annual General Meeting physically, but in the light of COVID-19 pandemic, carrying off the physical meeting this time was not in order. The Government of India has urged all its citizens to maintain social distancing norms in order to control the spread of coronavirus. Your company, thus, with an intention to support the measures taken by the government, decided to conduct the 28th Annual General Meeting this year through video conferencing and other audiovisual modes. Attendees of this AGM can post their queries, if any, in the question-and-answer box and same will be replied to the respective shareholders within a week's time. All the members who have joined this meeting are by default placed on mute mode, so that there is no disturbance from the background and in order to conduct the meeting in a smooth manner. Upon commencement of the question-and-answer session, I will announce the name of the shareholders who have registered to speak at the meeting. The speaker shareholder, if present, will thereafter be unmuted by the host. If such shareholder is not able to join through video, they can join through audio mode. The shareholders are advised to use the headphones for clear audio and switch off other background applications. If there is any connectivity issue at speaker shareholder's end, we will request the next shareholders to join, and that shareholder can be in queue and later, they can ask the question. Their time is limited to 2 minutes. The company had provided remote e-voting facility to all the shareholders from 6th of September 2020, 9:00 a.m. to September 8, 2020 5:00 p.m. on all the resolutions set out in the notice of the 28th Annual General Meeting. Members who have not casted their votes as an option to cast the votes during the AGM and even after AGM, there is a time limit, which is allotted 15 minutes so they can cast a vote. So these are the instructions, shareholders, I'm sure that you will keep that in mind. With this, now I hand over the proceedings to Chairman, sir, Anil Guptaji. Thank you, sir.

So thank you very much, Kunal. Good afternoon, everybody. I welcome you all to the 28th Annual General Meeting of your company. I would like to mention that in view of the massive outbreak of COVID-19, social distancing is a norm to be followed, and therefore, the AGM today has been convened through video conferencing and other audio visual means in compliance with the Companies Act 2013 read with circulars issued by the Ministry of Corporate Affairs and SEBI. The requisite quorum is present, and therefore, I call the meeting to order. I welcome my other colleagues on the Board of your company to the 28th Annual General Meeting. Now let me ask your Board of Directors to introduce ourselves. Pawan Bholusariaji, can you introduce yourself?

Good afternoon, everyone. I am Pawan Bholusaria. I am an independent director of -- on the Board of KEI Industries Limited. I'm also the Chairman of the Audit Committee, Corporate Social Responsibility Committee, Share Allotment Committee and member of the Nomination and Remuneration Committee, Stakeholder Relationship Committee and Qualified Institutions Placement Committee. I am attending the AGM from Delhi today. Thank you.

Thank you, Pawanji. Now I request K.G. Somaniji to introduce himself.

Yes. Good afternoon, everybody. I'm Kishan Gopal Somani, an independent director of KEI Industries Limited. I'm also a member of the Audit Committee and Qualified Institutions Placement Committee. I'm attending the meeting from [indiscernible] today. Thank you.

Thank you, Somaniji. I request Mrs. Archana Gupta to introduce herself.

Good afternoon, everyone. I'm Archana Gupta. I am a non-independent director on the Board of KEI and a member of Finance Committee. I'm attending the AGM from my residence in Delhi. Thank you so much.

Thank you, Archana. Now Akshit, please introduce yourself.

Good afternoon. I'm Akshit Diviaj Gupta. I am a whole time director on the Board of KEI Industries Limited, and I'm attending the AGM from the registered office of the company at New Delhi. Thank you.

Thank you, Akshit. Now I request Vijay Bhushanji to introduce himself.

Good afternoon, everybody. I am Vijay Bhushan. I'm an independent director on the Board of KEI Industries Limited. I'm also the Chairman of the Stakeholders Relationship Committee and a member of the Nomination and Remuneration Committee and the Share Allotment Committee. I am attending this AGM from Delhi today. Thank you.

Thank you, Vijayji. Thank you. Now I request Vikram Bhartiaji to introduce himself.

Good afternoon, everyone. I'm Vikram Bhartia. I'm an independent director on the Board of KEI Industries Limited. I'm also the Chairman of Nomination and Remuneration Committee and member of Audit Committee and Stakeholder Relationship Committee. I am attending the AGM from my residence at New Delhi through web. Thank you, everybody.

Thank you, Bhartiaji. Thank you very much. Now I request Sadhu Ram Bansalji to introduce himself.

Good afternoon, everybody. I'm Sadhu Ram Bansal, an independent director on the Board of KEI Industries Limited. I am also member of Risk Management Committee and Qualified Institutions Placement Committee. I'm attending the AGM from my office residence in Delhi. Thank you.

Thank you, Bansal sahab. Thank you. Now I request Shalini Guptaji to introduce herself.

Thank you. Well, good afternoon, everybody. I'm Shalini Gupta. I'm an independent director of the Board of KEI Industries. I'm attending the AGM from Gurgaon. Thank you.

Thank you, Shaliniji. Thank you. Now I request Rajeev Gupta, ED Finance and CFO, to introduce himself.

Good afternoon, everybody. I am Rajeev Gupta, Executive Director of Finance and CFO and whole time director of the company. I'm also member of Finance Committee, CSR Committee, Risk Management Committee and QIP Committee. I'm joining the AGM from the registered office of the company at New Delhi, Okhla. Thank you.

Thank you, Rajeev. We also have with us the statutory auditors of the company, Mr. Pawan Kumar Agarwal, Partner of M/s Pawan Shubham & Co.; and scrutinizer of this meeting, Mr. Sumit Kumar Batra, Proprietor of S.K. Batra & Associates. I request Pawan Kumar Agarwal, our statutory auditors to introduce themselves.

Good afternoon. I am partner of Pawan Shubham & Co. I'm attending the meeting from my office in Delhi. Thank you.

Thank you, Pawanji. Now Sumitji, please introduce yourself. Batraji please introduce yourself.

Good afternoon, everyone. I'm Sumit Kumar Batra, Proprietor of S.K. Batra & Associates. I'm appointed as scrutinizer of the 28th Annual General Meeting of KEI. I am attending this meeting from my office in New Delhi. Thank you.

Thank you, Sumitji. So dear members, the notice convening this AGM and a copy of the annual reports for the financial year ended March 31, 2020, have already been circulated to the members of the company through e-mail, and notice in this regard was also published in the newspaper. With your permission, I shall take them as read. Now with your permission, I will begin my formal address to the shareholders. It is a pleasure to connect with all of you again, although this time, we meet virtually. On behalf of entire Board of Directors of KEI Industries Limited, I want to thank you for taking the time out to join us today. Your support and confidence in us, even in uncertain times like these, drive us to do more and create greater value. The world is tackling an unprecedented crisis with the outbreak of coronavirus pandemic. In this unusually changed landscape, we, at KEI, renew our commitment towards partnering the vision of self-reliant India and demonstrating business resilience. Led by our unflinching resolve to create better stakeholder value, our focus will be on navigating this acute phase of uncertainty while ensuring that we stay well positioned for growth acceleration once the world recovers from the pandemic. Reviewing the year gone by, I take great satisfaction in reporting that your company has delivered a robust performance. The results are even more commendable as they have been achieved, again, a tough operating backdrop. India was already facing a protracted economic slowdown even before the pandemic took us all by surprise. The nationwide lockdown in the last 10 days of March significantly dented our revenue collections, particularly for our Retail segment as there is -- that is when a significant part of our invoicing for the fourth quarter takes place at the dealer level. Despite these challenges, we generated a revenue of INR 4,884 crores in net sales in financial year 2019-'20 as against INR 4,227 crores in the previous year, a growth of 15.5%. We also delivered strong margins with profit after tax growing by 40.3% to stand at INR 255 crores as against INR 182 crores in the previous year. Another highlight of the year was, we successfully raised INR 500 crores through Qualified Institutional Placement. The proceeds of the QIP have been utilized for repayment/prepayment of debts, meeting working capital requirements and general corporate purposes. This has further strengthened our balance sheet and improved our net cash position. As mentioned earlier, our Retail segment was adversely impacted by COVID-19 outbreak and the lockdown that ensued. Dealer network sales in the fourth quarter of the financial year '19/'20 was INR 325 crores as compared to INR 405 crores for the corresponding period in the previous year. This lower-than-expected fourth quarter results made its impact felt on our full year retail sales, which registered a flat year-on-year growth over the next few months. This segment is likely to continue to face challenges with slower offtake by the real estate sector and consumer deferring nonessential purchases. To ensure that we can scale up our retail sales, once the external situations improve, our focus remains on growing our dealer network. We will also continue to deepen our engagement with our channel partners and influencers to widen our customer base. However, the institutional segment reported a solid performance for the year under review. We have commenced financial year 2020/'21 on a strong footing as well, as we recently bagged a landmark order for the execution and supply of extra high-voltage cables of 400 kV voltage grade. KEI is among a few international players in this industry who manufacture and supply cables of 400 kV voltage grade. As the nation is trying to emerge from the shadows of the COVID-19 pandemic, the government is strongly pushing for a self-reliant economy by promoting local manufacturing. With our world-class capabilities in extra high-voltage cable manufacturing, we are proud and determined to contribute to our nation's vision. Further, extra high-voltage cables are being increasingly used in underground power transmission and hydro power projects due to its inherent advantages of security and reliability. These dynamics combined with the government's thrust on vocal for local, will, we believe power an exciting future for our extra high-voltage cable division. Our EPC division, which is a forward integration of our cables business, also delivered a steady performance for the year for our EPC projects at various sites, we also depend on the contractual labor. While the migrant workforce in India has been most affected by the COVID-19, I'm glad to share that at KEI, having always been proactive in ensuring timely payment to our contractors and providing conducive working conditions, we have been able to support our contract workers through this difficult period. We have not faced much labor issues at our project sites and expect to efficiently execute our ongoing projects. We continue to be selective in undertaking EPC projects, bidding only for those that have a significant cabling requirement as that gives us a strategic advantage in earning better margins through our in-house supply of cables and inputs. As infrastructure development is stepped up to kick start the economy, along with continued focus on improving power transmission and distribution, we are optimistic that our proven EPC track record for marquee projects under flagship government schemes will position us well to win new contracts. The execution of the prestigious single large order received from an Africa-based company propelled the performance of our Exports segment during the year. In financial year 2020/'21, we believe that our well-diversified geographical presence will enable us to deliver export revenues in line with our past performance, excluding that in financial year '19/'20, which was exceptional due to the single large order from oil refinery in Nigeria. Our ability to meet stringent prequalification parameters, foster strong customer relationships and customize our products to cater to niche demands across industries will empower us to maintain the growth momentum. Our business is powered by our committed and talented team of employees. Their expertise and experience will especially be pivotal in navigating these unprecedented times. We are taking stringent protection measures at all our factories and project locations to ensure the health and safety of our people. Moving into a challenging year, we already have a strong order book for our institutional and export segments. The institutional orders include supply of cable for a nuclear power project, several metro projects, fertilizer and refinery expansions and railway projects. These ventures are being pursued with the same intensity by our customers post COVID and thus, we do not anticipate any delay in project executions, except some short durations due to -- I mean unknown lockdowns. While we have adequate capital to meet business requirements, we recognize that the situation is fluid, and we are thus exercising prudence for all our spending to conserve cash and maintain liquidity. Keeping the uncertain times in perspective, we have also decided to defer all major CapEx till Q3 when the external environment will be reviewed again as we have built sufficient capacity. Hence, the postponement of CapEx will not impact our near and midterm growth plans. Finally, our consistent financial performance year-on-year is compelling evidence of our resilient operations, among other things, our stable financial position has enabled us to invest in capital expenditure, including towards purchase of technology and R&D. Along with our in-house manufacturing capability and capacity, our excellent execution record, strong prequalification credentials, pan-India distribution network and sufficient cash reserve to fund greenfield CapEx, position us at a vantage point to capture growth when the cycle turns. In closing, I would like to express my gratitude to everyone who has contributed to our success, our customers, bankers, financial institutions, central and state government bodies, channel partners, business associates, suppliers as well as employees, our community and to you, our shareholders. While the times ahead may be challenging, KEI remains committed to staying resilient and responding with alacrity to the evolving situation. Our strong fundamentals will continue to drive our momentum in the medium and long term. Thank you for your committed trust and faith in us.

Thank you, sir, for your wonderful speech. I now request our statutory auditor, Mr. Pawan Kumar Agarwal to read out the auditor's report for the benefit of the shareholders. Pawanji, can you read out it to everybody…

Thank you, Kunal. In the interest of time, I would be reading the first 2 paragraphs of our audit report. We have audited the accompanying standalone and consolidated financial statements of KEI Industries Limited, which comprise the standalone and the consolidated balance sheet as of 31st March 2020, and the statement of profit and loss, including other comprehensive income, the cash flow statement, the statement of changes in equity for the year ended, notes to the financial statements, including a summary of significant accounting policy, and other explanatory information. In our opinion, to the best of our information and according to the explanation given to us, the aforesaid standalone and consolidated financial statements give the information required by the Companies Act 2013 in the manner so required and give a true and fair view in conformity with the IND AS prescribed under Section 133 of the Act read with the Companies Rules 2015 as amended and other accounting principles generally accepted in India, and the statement affairs (sic) [ state of affairs ] of the company as at 31st March 2020, and there is no qualification in our audit report. Thank you, Kunal.

Thank you, sir. Pursuant to the provisions of the Companies Act and the SEBI regulations, the company has provided the facility for voting by electronic means to all its shareholders. For this purpose, the company has tied up with NSDL, who has provided the facility for e-voting. The company provided a remote e-voting facility to all the shareholders who were the shareholders as on the cutoff date, which was 2nd of September 2020. Members attending the AGM today who have not cast their vote by remote e-voting are entitled to exercise their right to vote by e-voting during this meeting and the 15 minutes, which will be allotted after the AGM. So during that period, they can vote. Mr. Sumit Kumar Batra, practicing company secretary, has been appointed by the Board as the scrutinizer for conducting the e-voting process in a transparent manner. The results will be declared on or before 48 hours after considering the e-voting done today and the voting which has been done through the remote e-voting facility. The result will be declared, along with the scrutinizer's report, and the same will be placed on the company's website and on the website of NSDL. The company shall simultaneously forward the results to all the stock exchanges where the company shares are listed NSE, BSE and Calcutta Stock Exchange. As the meeting is convened through VC, resolutions have already been put to vote to remote e-voting, and the requirement to propose and second is not applicable for this meeting. Dear shareholders, thank you for joining today and for taking time to participate in today's Annual General Meeting.

Before we start with the live question-and-answer, there are some points to note. The person who has registered as a speaker shareholder, so I will mention his name, and then he has to mention the name, folio number, DP ID, client ID and the location from where he or she has joined this meeting. Each shareholder will have 2 minutes of time to ask the questions. Once you have asked your question, you can log off and continue to watch the proceedings. So as per the information which the shareholders have sent to us, so can I request Yusuf Yunus Rangwala, if he's in the meeting to ask the question. Okay. So since Yusuf has not joined, so -- and I now ask another one to ask the question if he is present in the meeting. Mr. Manjit Singh. Are you in meeting? Mr. Manjit Singh, kindly unmute yourself at your end.

[indiscernible]

Yes. Mr. Manjit Singh you are audible now.

[Foreign Language]

[Foreign Language] So now you can...

[Foreign Language]

[Foreign Language]

Thank you, sir. So now I'll ask another shareholder, Mr. Santosh Bhutani. If he is present in the meeting, he can go ahead with his questions. Okay. I have been informed that he is not there in the meeting. Jasmeet Singh, next shareholder. He can ask a question. Mr. Jasmeet Singhji, if you are present, you can ask the questions. [Foreign Language] So in the meantime, I'll ask, Pramod Kumar Jain, if he's in the meeting, he can ask a question, if he is there in the meeting. Pramod Kumar Jain. Pramodji, you can go ahead with your question.

[indiscernible] [Technical Difficulty]

[Foreign Language] So there is some connectivity issue at their end. I will ask Pradeep Sood, if he is in the meeting, he can ask the questions. Mr. Pradeep Sood, please go ahead with your question. In the meantime, I will ask Narender Singh Chauhan, if he is present in the meeting to ask the question. Mr. Narender Singh Chauhan? He is not present. Mr. Ashok Kumar Gupta, if he is in the meeting, he can ask the question.

Hello? [Foreign Language]

[Foreign Language]

[Foreign Language]

Guptaji, your suggestions well noted. [Foreign Language]

I have taken up all the request of the shareholders who have registered. Mr. Raju Verma, if he's in the meeting, he can ask the questions. We have limited time, so we'll conclude with his questions. If he is present the meeting, he can go ahead with the questions. Mr. Raju Verma?

[Technical Difficulty]

Yes, go ahead with you question, please.

[Technical Difficulty]

[Foreign Language] So with this, we conclude the meeting. And with this, we conclude the question-answer session also for all the shareholders. So if there is any question and answer, which is in the chat box, so we will answer to those queries to the respective shareholders within a week's time. Thank you, shareholders, for asking the questions on this virtual AGM. I once again thank you, all the shareholders, our Chairman sir, Board of Directors, auditors, for their participation, and now I request all of them to log off from their side. So they can log off. The members who is attending the meeting, if they have not casted their votes, so the line will be open for next 15 minutes, and they will have the right to cast a vote online. So from 15 minutes from now, the voting will be open. They can vote if they have not already casted their votes. I request Board of Directors to mute -- to log off from their side, and we conclude the meeting here. Thank you so much for joining us.

Thank you so much, dear shareholders, and thank you to all our associates and colleagues and directors. Thank you so much for joining us.

Thank you, Anil.