KEI Industries Limited (517569) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Q3 FY '22 earnings conference call of KEI Industries Limited hosted by Monarch Networth Capital Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Anubhav Rawat from Monarch Networth Capital Limited. Thank you, and over to you, Mr. Rawat.

Thank you, Needhav. Good afternoon, everyone. I hope everyone is safe and healthy. We are pleased to host the senior management team of KEI Industries today, and we have with us Mr. Anil Gupta, Chairman and Managing Director of the company; and Mr. Rajeev Gupta, CFO of the company. Let us start this call with management's initial comments about the results and then we can take your questions. Over to you, Anil sir.

Thank you. Yes. Good afternoon, everybody, and welcome to this conference call. I'll give a brief about the Q3 results of KEI Industries. Although you have all these numbers with you now, I'll give a brief. Net sales of the company in Q3 is INR 1,563.85 crores. And we have grown in net sales by 35.64% in this quarter year-on-year basis. The company has achieved highest ever quarterly sales in this quarter. EBITDA in this quarter is INR 158.54 crore and a growth in EBITDA compared to previous quarter year-on-year is 22.93%. EBITDA/net sales margin is 10.14% as against 11.19% in the same period previous year. EBITDA margin declined mainly because of some expenses normalized back to pre-COVID level and sharp fluctuations in the input costs. Profit after tax this quarter is INR 101.25 crores against INR 76.15 crores in the same quarter previous year. Growth in the profit after tax is 32.96%. This company has achieved highest ever quarterly PAT during this quarter. PAT/net sales margin is 6.47% versus 6.6% last year same period. The company's domestic institutional wire and cable sale in this quarter is INR 480 crores and -- against INR 343 crores in the same quarter last year. The growth is approximately 40%. And the growth in the institutional EHV cable sale is INR 183 crore. Domestic institutional EHV cable sale is INR 183 crore, and the growth in this segment is 18%. Export sale this quarter is INR 186 crores. The growth in this is around 34%. Out of this export sales, cables INR 139 crore, EPC INR 15 crore and stainless steel wire INR 32 crores. Total cable institutional sale contributed approximately 50% -- 51% in third quarter against last year same period, 52%. And sales through dealer network, dealer and distribution network achieved is INR 634 crore in third quarter against INR 410 crore last year. So growth in this segment. Sales through dealer network is 55%. So from the beginning of year 2021, company has been working on strengthening its dealer and distribution network and has recruited more than 150 manpower upfront in the marketing department from electrical and other FMEG background at different levels pan India, resulting into good growth in the B2C segment business. The total team working dealer of the company as on 31st December 2021 was approximately 1,700. And total sale contributed through dealer network is 41% of the total sale of the company in third quarter against last year same period, it was 36%. The EPC sale other than cable is INR 93 crore against previous year INR 122 crore. Decline is approximately 24% in the third quarter. Out of the total sales of EPC, the sale of turnkey contribution from extra high-voltage cable projects is INR 38 crores as against INR 30 crore last year same period. The stainless steel wire sale in Q3 of FY '22 is INR 65 crores against same quarter in the previous year is INR 41 crores. The growth is approximately 59%. Now I will give a brief of 9 months summary. During 9 months, the company achieved a sales of INR 3,935 crore, resulting into a growth of 34% in the 9 months period. And EBITDA achieved in 9 months is INR 424 crores, and the growth is 26.3%. Net sales margin -- EBITDA/net sales margin is 10.77% as against 11.43% in the same period previous year. Profit after tax in 9 months is INR 260 crore, and the growth in PAT is 42%. So the PAT/net sales margin has improved to 6.62% versus 6.25% last year same period in the 9 months period. So the domestic institutional wire and cable sale has grown by 52%. And export sale, however, in the 9 months period has declined by 15%. However, the total institutional cable sale in 9 months has contributed 50% against 9 months against last year 55%. And sales through dealer network is grown by 70% in 9 months period as compared to last year -- of last year 9 months. And as I mentioned that the sales through dealer network has contributed 41% in 9 months against last year of 32%. The EPC sale has declined in 9 months period by 19%. This is in line with our previous guidance to lower EPC business and restricted to approximately 10% of all the total revenue. Stainless steel wire sale in 9 months has grown by 74%. Now the pending orders as on today is -- as on 31st December is INR 2,994 crore. In this, the EPC pending orders are INR 1,038 crore. EHV cable and EPC extra high-voltage cables, turnkey projects, INR 419 crore. Cable domestic business is INR 1,429 crore and export -- cable export orders pending are INR 108 crore. Besides that, whatever sales we do through the dealer network, in that, there is no pendency of orders because they are generally orders placed and then supplied through -- from the stock, so a ready stock. So no order book is there for the B2C sale of our wires and cables. The company's credit rating from ICRA Care and India ratings is AA- for long-term bank facilities and A1+ for short-term bank facilities. The book value per equity share of the company is INR 226.48 as on 31st December 2021 as against INR 197.38 as on March 31, 2021. Borrowing and operating cash flows and finance cost. Net debt, including LC acceptances is INR 487 crore as on 31st December 2021 as against INR 407 crore as on 31st March 2021. However, it was INR 922 crore as on 31st March 2020. So a substantial decline of around INR 450 crore from previous financial year -- so from the financial FY '20. During the 9 months of FY '21, '22, finance cost has decreased to INR 30.34 crore as against INR 44.78 crore in the previous year same period. Percentage of financial charges on the net sales has decreased in this period to 0.77% from 1.53%. The company has used operating cash flows for cash purchases resulting into reduction of trade payables. That means creditors through LC letter of credits acceptance is substantially by INR 243 crore as compared to March 21, which has further reduced finance costs during the 9 months. Though it may impact certain financial ratios like working capital cycle or return on capital employed, but it has benefited the company in the form of reduction of finance -- reduction in the finance cost. Future outlook of the company. Our strategy is to increase continuously the retail sale and downsizing EPC business, which is working well. And in future, within 2 years' time, our retail sales will reach around 50% of the total sales of the company with annual growth in the retail by 30% to 35% per annum. In retail business, which is evident from 9 months period of FY '22 results. We think that retail business offers superior growth prospects with better margins and lower working capital requirements. Capacity utilized during 9 months of FY '22 is 71% in the cable division, 66% in the house wire division and around 100% in stainless steel wire division. So the company has already has capacity to achieve growth in the next financial year, which is already in place. Company is in the process to expand the capacity for setting up a greenfield project for LT, HT and EHV cables with a investment of INR 700 crore to INR 800 crore will be incurred in 3 to 4 years' time to maintain a CAGR of 17% to 18% for coming years. Our last 15-year CAGR is 15%, and last 5 years CAGR is 20%, except 2021 financial year. Overall, the company is targeting more than 30% growth overall in FY '22, with strong order book in hand and good demand from the government and private CapEx and as well as the real estate. The -- I'll mention about little bit of demand drivers. There's a continuous demand from government infra projects as well as private CapEx, especially from solar power projects, metro rail projects, oil and gas sectors and steel, cement and refining sector industry, underground cabling projects of transmission and distribution in metro cities, highway projects, including panel and ventilation projects, smart city projects, steel industry expansion. We expect that we will even grow in the exports. As we have seen in the Q3, our export has grown by approximately 35% compared to last year. So this is from the management side. I thank you very much for your valuable time in this conference call. Thank you, and you may ask any questions if you may have. We'll gladly answer it. Thank you.

[Operator Instructions] The first question is from the line of Rahul Agarwal from InCred Capital.

Just quick questions. Firstly, to start with, I understand copper was volatile and hence, margins were soft on the quarter. Could you help us understand how does fourth quarter look like? How is the start to January? And some price hikes are pending here to be taken in fourth quarter. Could you help understand some color on this, please? That's the first question.

The price hikes are continuously passed on from -- whenever the raw material prices are increasing, they are taken into consideration whenever new offers are made. And so far as the retail is concerned, prices are practically [ priced ] on readjusted every 15 days. So the little bit of effect of 1% margin was there because of some pending orders of extra high-voltage and some other orders, which were on the firm prices. And all these orders has been executed and cleared. We do not have any pending orders for at old prices in any category. So whatever orders are now there in the system, they are all booked from the copper and aluminum level, which are presently prevailing. So we don't -- do not see any margin erosion in the coming time.

In the last 3 months, I think prices are also [indiscernible] for copper and aluminum.

So margins go back to 11% fourth quarter? Is that understanding correct?

I can't say exactly, but we hope that it will be maintained because there is no pressure of raw material prices now.

Got it, sir. The second question was when looking at achieving very good scale on the housing wire side, we're almost running at INR 1,600 crores yearly run rate now. How is the pricing behavior been in the market for KEI for housing wire versus Havells, Polycap like -- are we now the discounts versus these brands have reduced? Are we at par? Any color, please?

No, no. We are still maintaining the same price levels, and we are -- I mean, definitely, there is a price gap of 3% to 5% from Havells and Finolex. But [indiscernible] improving our margin and reducing this gap year after year from the stronger brands.

Got it, sir. Sir, thirdly, on the order book. So obviously, as you said, dealer sales doesn't have an order book, and that is about 40% of top line. So if I remove that sale from annual sales, we're talking about INR 3,000 crores of sales coming from non-dealer. And that is equivalent to the average order book has been remaining in that range of INR 2,500 crores to INR 3,000 crores. I just wanted to get your help on to understand this number that is that decent enough to run a 12-month order book or you would have -- is this number going to go up or down going forward? Because my understanding is housing wire sales growth is much higher than the non-dealer company level sales. So obviously, this number will stay here. So could you help me understand this?

Yes, yes. I think you are right that the order book -- booked order numbers should remain [ simpler ] because in this around INR 1,400 crore orders or INR 1,500 crores orders are only of the equity. So these orders will be executed over a period of 2 years. So rest the cable orders, which are in the vicinity of INR 1,550 crores, they will be -- and EHV cable, so they will be executed -- they are executable within next 4 to 6 months maximum. Maximum 90% orders are executed within 3 months, but 10% to 15% goes up to 6 months also. So the numbers of the pending order will remain same because 40%, 42% coming from retail.

Got it, sir. And lastly, any expectations from the budget as in anything specific on cables and wires in terms of duties, et cetera? Or is it largely going to be again supporting and boosting government and private sector CapEx? That's my last question.

We are not expecting anything from the government. I think the -- by lowering the income tax, they have already done enough. They're -- what we expect is the demand, which will come through the government spending infra push and other policies like our productivity-linked incentive, et cetera, which will create -- bring industrial and create demand for wires and cable.

[Operator Instructions] The next question is from the line of Lavina Quadros from Jefferies India.

Congrats on a good set of results. I just wanted to understand, there was some delay in offtake, I mean, your working capital on the inventory side has been impacted a little bit. So could you just explain if there was any delayed offtake on deliveries and reasons for it?

Yes. Lavina, you first of all, if you go by a holding period of the debtors and inventory, it has reduced further 0.25 months, if we include debtor and inventory as compared to the last year. But the working capital hits -- you are seeing because of the current liability, the payable, which Anil earlier told. So it is -- the table has reduced substantially by more than INR 243 crore. So it comes out to almost 1 month. So because of that, it is looking like that working capital increased, but it is not the case because whatever cash flow we were having, we were utilizing to reduce the interest bearing creditor. So -- and that we did around INR 14 crore of interest costs. In terms of absolute number, we [ have skipped ] for that actually. A little bit inventory can be reduced further of the finished goods, which definitely will be adjusted in this quarter by increasing the sales.

Okay. Sir, so the company environmental issues, what was it exactly that impacted 3Q?

Actually close to another INR 100 crore of [indiscernible] was stuck because of these environmental issue in the month of December.

Because the -- we had a big stock of manufactures for Delhi Transco and some INR 50 crore to INR 55 crore worth of cables could not be dispatched because there was a ban on entry of diesel vehicles because of the pollution level in Delhi and in also in the NCR region. So a lot of dispatches could not be done for large institutional orders because of the -- because they needed large trailers to transport and they were [ done ].

Okay. So that should be in the month of January.

That has already been liquidated in January, already been dispatched.

Understood. And sir, lastly, the interest cost breakup, please, for the quarter.

You can write down. Interest on term loan for this quarter is INR 0.67 crores, and the working capital interest is close to INR 4.6 crore. Then LC interest cost itself reduced -- sorry. Please note again. The term loan interest is 0.48. The working capital interest is close to INR 4.6 crore. Then LC interest is very minimum of just INR 0.03 crores. Bank charges on LC is also INR 0.09 crores, bank charges on bank guarantee is INR 2.43 crores and the other bank charges like processing fee et cetera, it is INR 1.27 crores.

The next question is from the line of Amit Mahawar from Edelweiss Financial Service.

Congratulations on great retail-driven growth. Sir, I just have one question. So typically, if you see the way we are going, we will be crossing retail revenues especially on house wires around INR 2,000 crores by maybe '24. That should translate a significant cash flow in our business. And if I take on a 3-year scale, am I right in my understanding that generally, we should be able to drop more than INR 250 crores to INR 300 crore plus worth of operating cash flow average in the next 3 years? That's my first question, sir.

So you are right, Amit, because of increasing of the -- of retail channel sale, our cash flow is improving every year-on-year basis. And because of that, we are able to utilize our cash for the cash purchases, which had reduced the already the interest cost. And from here onward for next 3 years, our capital expenditure is in pipeline. Approximately every year, INR 200 crore INR 250 crore in the new CapEx area for low tension, high tension and extra high-voltage power cable. So that will be met through this cash flow only. So because of this heavy operating good cash flow, so we are able to generate this kind of through the retail as well as we are going to spend into the CapEx without taking any further loan et cetera. That is only -- it is only possible because of this business model.

Sure, sir. Sir, maybe one more question, if Anil ji can help. Sir, typically, beyond our cable expansion, which I'm sure should happen in the next 2 years. Generally, beyond 1 to 2 year, how will you think of the retail franchisee maybe around want to attain a critical mass in wires, we will think of FMEG. But am I right in my understanding that maybe beyond '23 and -- maybe beyond '24 is where we will have a bigger FMEG plan? Before that [indiscernible] was not visible. Am I right, sir?

Actually FMEG plan are there, but still we are more focusing on the grabbing the market share for the existing products of house wires. So that's why we are little bit conservative for adding new products. But still, that is on the radar and in the planning stage also. That's why the 150 people whosoever inducted into the retail team of house wire, they have been taken from the various background of the electrical FMEG products. So in future within a year time, definitely, it will be done. But in the meantime, we are able to grow our house wire business.

Sir, maybe one last…

So in this year also -- we in 9 months, we have grown close to 70% of our dealer distributor business.

Yes. Yes. And if I exclude the pricing impact, it is still more than 30%, 35% in value growth, sir?

Yes, yes.

Volume growth, sorry?

Volume growth is close to that.

Okay. Okay. Sir, maybe one last question from my side. Of the current sales force that we have for branded wires, what percentage is there in northeast and in south in general?

Yes. We have given the percentage also. It's the breakup of the revenue, then the 37% comes from the north, second followed by west, that is of 31%.

Yes. I know, sir. Sir, I saw that. I saw that. No, I saw that. My question is different. Basically, in the current sales team, northeast and south would account for what percentage of the manpower deployed for marketing and dealer distribution?

So now we are -- Anil ji is deploying more and more manpower in the south and eastern side.

Already have a good amount of manpower in the northeast and eastern India. And now we are increasing our strength in the south. South, we still have lesser people. But in eastern India, we have already strengthened in last 9 months. And that will show results in the coming quarters. And south, we are now in this quarter is our focus. We'll be strengthening our marketing [indiscernible]

[Operator Instructions] The next question is from the line of [ Naman Parekh ] from [ NSS ] Securities.

My question is regarding the CapEx plan for the company, like how much CapEx has been done for the quarter?

We are in the process of acquiring the land. And within 1 months' time, we will do the registry. So the advances are given. So now the registry will start from the first half of February. And then within 1 month, the registration will be done. So the land will be acquired, and we will start doing the CapEx in terms of the building and advances for plant machine et cetera. So it will take another 15 to 18 months' time to set up fully this project in Phase 1.

Okay. Like can you let me know the amount of the CapEx that might be done on the like the 15 to 18 months period of project?

15 to 18 months, as I said, in every year, our target to spend around INR 200 crores to INR 250 crores in a year. So in the current year, it will go to close to INR 60 crores, INR 70 crores, and then next year, it will only have INR 220 crores, INR 250 crores, then again next year, more than INR 200 crores.

The next question is from the line of Harshit Kapadia from Elara Capital PLC.

Congratulations for a good set of numbers. So just wanted to check with you, sir, in terms of margins, we have seen a quite deterioration on a Y-o-Y basis, even on Q-on-Q basis. Can you share in terms of product segment wise, what kind of margins that you have still on that will help us to understand how fast can we able to recoup the margin from the coming of quarter?

See, in the institutional sale, as Anil ji explained, especially for extra high-voltage power cable, where the order are pending for 6 to 7 months. So that got hit because this time, the fluctuation was the sort of rise times actually, at one side actually. When the copper adjusted goes up and goes down. But this time, it is going up and up again. So because of that, it got hit 1%, 1.5%. But we were able to recover our margin by reducing the expenses versus sale to reduce the percentage. So because of that, we were hit only by 1% in this quarter. And now since last 3 months, all the copper and all the metal price are stable. So in future, it will be normalized now.

Sir, can you share what kind of a price hike here taken in Q3 for the business segments?

In terms of retail?

In terms of retail, yes.

See, in terms of retail, I think price hikes are around 5% to 7% because there was not much hikes in the Q3. Hikes has, especially in copper. Copper was peak -- copper had peaked in, I think, May or June. So far us institutional business is concerned, it is every time we make an offer, we are always considering the existing price levels of raw materials. So the price hikes are passed on continuously, on a continuous basis.

Okay. And just final question on the expanding your wire segment in the different electrical business. So can we expect any loans in the next financial year in terms of product category? And then you can scale up your business, if you can share some insights on that will be helpful.

We are not accepting any launch of any other product in the next year. But we will be -- we are -- presently, we are focusing on our wire business in the retail segment. But definitely, it is in our radar to add some other category products in the electrical goods, which we'll let you know whenever we see this -- these products.

You see, we are not in a position to earn the money from cable and burn the money into the new products. So because little bit debt is still in the books. So first, our focus is to run the company without any debt and almost on the 75% to 80%, we have covered the space to reduce the debt. Balance 25% [Foreign Language] that we are doing, still doing. And we are hopeful within 2 more -- within 1, 1.5 year time, we will reduce the debt also whatever little bit that is had. So because of that, we are going very conservative. So -- and at present, we are more focusing on the buyer. So we are at present, suppose in house wire segment, we want to grab the market share of close to 10%. So that is our focus. We want to increase our sale through retail, whether it is from new products or from existing products. So existing product sale increase is better because it is giving us the good profit and good cash flow.

The next question is from the line of Shrinidhi from HSBC Bank.

Congratulations on good set of numbers. Sir, couple of questions from my end. Firstly, on sir, guidance, we see a quite a strong guidance over medium term. And if I see next year, a lot of this growth that you're guiding has to come from volume growth. So just wondering, where are we driving confidence in terms of this growth?

As Anil ji has -- he spoke about the various sectors, wherein he is seeing the growth and the orders are coming and very good order pipeline. We are having around INR 1,500 crore worth of from domestic institution and INR 100 crore worth of order from the export market for the cable segment. So that is visible for us these kind of demand. And capital expenditure, the government is focusing, whether it is in the power sector or in the infra sector. So everywhere this capital goods is required where the cable will be sold actually. So actually in the past experience of the last 15 years, wherein the economy was strong or economy was weak, still we were contributing close to 15% CADR [Foreign Language] it is close to 20%. So 17%, 18% growth is -- was never a challenge to KEI. Because of the setup we are having, we are having export. We are having domestic institution. We are having the extra high-voltage. We are having retail. So because of this, in institutional side, we are serving in a year close to 1,500 customers, 1,700 dealer distributor, then 50 countries to export. So very bright diversified customer base we are having. So because of that, we are always confident to grow at least 17%, 18%.

Fair enough, sir. And sir, on this dealer and distribution network, would it be possible to throw some color on what this number could be from current level of 1,700 that you have? And sir, second is some of your peers major retailer reach, okay, a number close to 2 lakhs. For some companies, it is 150,000. Do we measure that number?

Yes, yes. So you see this year, our CMD sir has focused and given direction to all the marketing people to maintain the dealer distributor number, to exchange with the strong dealer numbers and to replace the weak candidate. So the whole system was overhauled and the new dealer distributors are engaged by replacing the existing. But his vision was to first increase the sale of the existing dealer distributor, so that their ROI can increased.

No, no. I think your question was regarding mapping the -- whether we are mapping the retailers. Yes, we are mapping the retailers, which are working under a distributor. And most -- many of our distributors are having 25 to 50 retailer to whom that distributor is getting the retail shops. So…

And the number of the retailers are increasing.

Our retailers should be around 20,000 to 25,000 at the moment. But exact numbers, I'm not having that [ number ].

Fair enough, sir. And sir, a couple of more question, if I may. Yes. So on the retention money, sir, would it be possible to throw some light on how it has progressed? Is it as per your expectations?

Yes, it is our expectation. As we guided earlier that INR 150 crores will be recovered from EPC division, we have already recovered INR 100 crores. So outstanding of EPC has gone down by INR 100 crore already. And within this quarter, the balance INR 50 crore will also be receiving.

And I mean, we can just say that next -- from FY '23, the company should -- will be able to generate strong cash flows for the -- in the company. You see this -- we have already -- in this Board meeting, we have already declared a interim dividend of INR 2.5 per share, which is corresponding to 125% of the [indiscernible] capital. So as our free cash addition list will improve, the dividend may also improve.

Fair enough, sir. And last one, if I may, sir. Rajeev sir, if you -- can you update us on how much of our retail business is already under channel finance? And how much is it -- how much of that channel finance distribution businesses with INR 3 crores? And -- yes, those 2 numbers.

I think, are we -- [Foreign Language] without the course off the limit sanction where [Foreign Language] or within a year time, under recourse will be very, very less. Only we'll be there without recourse by next year because already Yes Bank, IndusInd Bank, Axis Bank, they have already sanctioned without recourse. So it will not show in the balance sheet to that extent. So when it will be replaced in next 3 months, so the new channel finance will be without recourse.

But sir, how much -- yes, that's helpful, sir, but how much is as of now business…

As of now, so suppose INR 200 crore plus was the channel finance amount. But under recourse, it is under -- it is close to INR 150 crores.

[Operator Instructions] The next question is from the line of Nirav Vasa from Anand Rathi Financial Service.

Sir, my question pertains based on the order backlog that we have, what percentage of order backlog is protected with price variation clause?

The price variation is almost -- 10% to 15% orders are with price variation, which is from the PSU side.

And sir, what kind of price hikes have been taken in first 9 months? And what kind of price hikes are you planning to take in fourth quarter for the retail channel?

I had already mentioned that in last -- in the third quarter, the approximate price hikes were around 5% to 7.5% in different sizes of wires and cables, depending on the raw material configuration. And I have said that we are adjusting the retail pricing every 15 days. And so far as projects or B2B business is concerned, every time we are making an offer, it is done on the existing price level and execution during -- considering execution period, we are building other -- enough safety margin. And ourselves we have hold that stock or we had booked the copper and aluminum for that.

So effectively, if I can say that the gross margin preparation that we have seen in third quarter in 9 months FY '22 can be attributed mainly to the institution business, which are fixed price in nature and there has been a equal trend quarter with high commodity process?

Yes, you can say that.

The next question is from the line of [ Teriwang Patel ] from [indiscernible] Management.

Sir, what is the volume growth we have seen for the cables and wire business in Q3 and 9 months on a Y-o-Y basis? If you can give that, please?

In Q3, the volume growth was 18%. And in Y-o-Y 9 month, it was close to 22%.

Okay. And secondly, what is our aspiration levels for the EBITDA margins? Once our retail share is 50% in the fuels, will we be reinvesting higher margins into marketing for new products on the FMEG side?

At least EBITDA, Anil ji has told you that the 11% EBITDA will not be a problem. And year-on-year basis, because our prices of the buyer is lesser than our peer group. So we will be improving by 0.25 to 0.5 bps year-on-year basis.

Yes. 1% around, we will be able to improve in the retail side.

So it will be a journey for next 3 to 4 years to reach or to bridge the gap of the prices.

Are you saying that overall EBITDA margin therefore will increase to 12% or only on the retail side, you're saying it will increase the [indiscernible]

In 2 years' time, we can say.

[ Or in ]

Yes. In 2 years' time, we can reach to that level also.

The next question is from the line of Rahul Agarwal from InCred Capital.

Sir, I wanted to discuss a part. Being debt-free is obviously great. I mean, as you said, about 1, 1.5 year, you will be debt free. But given the term loan rates for project deck today for the size of CapEx you are looking for and your -- based on your credit rating, my sense is it will be lower than 7%. Is it possible to retain this cash in the balance sheet and look for distressed assets for FMEG or even cable and wire assets if available in the country? Obviously, COVID would have had some impact on MSME. And these companies sometimes are also bought for acquiring land assets and they have the -- obviously, the plants are not attractive enough and they have old machines which are redundant anyway. So any thoughts on the way we are going to utilize our capital and make better use of cash? Just a thought, it would help understand the…

Yes. First of all, already -- it should be very, very clear from our side that we don't acquire the assets rather than we believe to grow and develop in a organic fashion. So that's how we are doing since last 30, 40 years. And our base is we are -- whether we had started EPC, whether we had started extra high-voltage power cable or we will start in future FMEG, we will start from our scratch, from our own manufacturing on a very strong footing. So we are into very conservative mode for that purpose. As far as the cash, whatever will be available, we are utilizing. We are not keeping or not investing in any mutual fund or any other activity other than the operation. We are utilizing only in the operation wherein we can get the direct benefits rather than the here and there. Whatever cash we were having, still we were utilizing for the cash purchase. And in future also, we will be utilizing in the operation purpose only. Because in the debt reduction, it doesn't mean we cannot borrow because we are having the essential limits and we will be having the essential limits. At any given fine [ talk time ], any good opportunity for growth is available, that money will be available to us.

Sir, I understand that. But even after accounting for CapEx, whatever range we are talking about, we still will have more cash. And obviously, even after paying all these payables, you've got it down significantly now. [Foreign Language]

[Foreign Language]

Okay, sir. So there's nothing in India which is available with a tax view? Is that all -- are you -- like [Foreign Language]

[Foreign Language] not more than 25%, 30%.

No, sir, I was more coming from the land angle. [Foreign Language] Is that an [indiscernible]?

[Foreign Language] Ultimately, ROCE is not so much important because ROCE [Foreign Language] so that we can successfully run the show. And by '26, '27 [Foreign Language] targeted INR 10,000 crores [Foreign Language]. Sir, without any accident, we should reach and we should reach the target.

The next question is from the line of Devansh from SIMPL.

Congratulations on great sale up in retail wiring. Sir, just if you can just throw some light on…

[Operator Instructions] The next question is from the line of [ Harish Kumar ], individual investor.

Yes. Sir, you mentioned that capacity utilization in one of the segment is 71% and in another 60% and the last one is 100%. So can you please categorize like if we utilize 100% of capacity in all the segments, how much revenue we can scale up?

Close to INR 6,400 crores revenue, we can scale up in that.

With 100% capacity utilization [ in India ]?

Around INR 7,000 crores we can see.

Yes, because like if I annualize [indiscernible] revenue, already we are around INR 6,000 crores of revenue. So why only INR 6,500 crores or INR 7,000 crores? I think it can go much higher.

Sir, that's why I say, sometimes it is not able to 100% utilize because -- sir, as Anil ji has told that we can reach to the INR 6,800 to INR 7,000 also. But it is very well say, but it is conservative. So for the next year, we are targeting a 17% to 18% growth.

So with the current capacity?

Every year, we do some debottlenecking in the existing plants and improve the efficiencies and increase the production by replacing older machines with the newer faster machines. But there also, we build up little bit of capacity year after year in the existing factories. And we have mentioned that we are going to do a CapEx and setting up a new greenfield project from April onwards in the FY '23.

Okay. Got it. And my another question was like because we are increasing retail sales every quarter-on-quarter, so can we expect some time maybe in 2, 3 years, net profit margins of 10% because it is higher margin product?

I think we are already able to generate 6.7% -- up to 6.5% net profit after tax. So improving it by 1% or 1.5% should not be a problem, but we can't give any guidance for this. We'll -- it will be always on the best preferred basis. We can -- we'll definitely improve the [ product ].

So are we setting internally some ambitious target for net profit margin or for sales? Like…

No. Our -- we have given a guidance for sales growth by a CAGR of 17% to 18%. So that -- and given that EBITDA of, say, 11% to 11.5%, that itself will grow the net profit margins year after year. So how much in percentage it can grow in terms of net debt is difficult to say. But any flat -- anywhere between 6.5% to 7% net profit after tax should be a good net profit on EBITDA turnover, on EBITDA sales.

[Operator Instructions] The next question is from the line of Devansh from SIMPL. Sir, the line for the participant again dropped. [Operator Instructions] The next question is from the line of [indiscernible] from ASK Investment Managers.

Congratulations for the set of results. I wanted to ask you, what -- could you give me the capacity utilization numbers be?

Capacity utilization in the wire and cable segment is 71%. And in the house wire division, it is 66% because we have added another factory in 2019. And our stainless steel wire division is operating at 100% capacity.

[Operator Instructions] As there are no further questions, I now hand the conference over to the management for closing comments.

So dear colleagues, thank you very much for, I mean, spending time with us for this question answer session. I again express gratitude to all of you to having invested with us and having faith in us. And I assure you that company will give a good growth and a good cash flows in the quarter-on-quarter basis in the coming years to reward its investors. Thank you very much.

Thank you very much to everybody.

Thank you very much. On behalf of KEI Industries Limited and Monarch Networth Capital Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.