Not much opportunity for EPC cos in solar as of now: Vimal Kejriwal, MD & CEO, KEC International

“Things will start improving from Q4, and we expect business to normalise from Q1 onwards.”

We just got our first EPC order from Europe, and we had acquired a manufacturing unit in Dubai last year.

By Rajesh Kurup

KEC International expects its cross-country oil & gas pipeline contract business to be a Rs 1,000-crore venture and win another Rs 1,500 crore from global contracts in the next two-three years. Further, with the easing of raw material prices, it expects business to limp back to normalcy from the fourth quarter onwards. Vimal Kejriwal, company’s MD & CEO, told FE’s Rajesh Kurup that opportunities from the solar sector were minimal and revenue from civil business is expected to double. Excerpts:

KEC posted lower net profit in Q2. Was this impacted by the Covid or rise in raw material prices?

There was a marginal impact of Covid on the topline due to global restrictions on business, but largely the impact was due to raw material headwinds. There was a significant rise in prices of steel and aluminium. On the margin front, we had some losses in our Brazil subsidiary because of Covid, which should ease by the end of this quarter.

How long do you expect the volatility in raw material prices to continue?

The prices of steel, copper, aluminium and cement have started coming down, and that impact will start showing up mostly from Q4 onwards. This year we have an order intake of Rs 12,000 crore. With the execution of these orders, we will also see profitability as these are at new cost levels. Things will start improving from Q4, and we expect business to normalise from Q1 onwards.

How will the acquisition of Spur Infrastructure help your oil & gas cross-country pipeline business?

It’s a complete EPC business, which is in line with the government’s thrust in this sector. Basically our clients are GAIL and IOC, and others like GSPL, and the total pipeline capex for these companies is about Rs 4,000-5,000 crore per year. We intend to grow this to a Rs 1,000-crore business in the next two-three years. Further, we expect to win a lot of global contracts, which will add another Rs 1,500 crore in the next three years.

Why isn’t solar a focus area for KEC?

As of now, there is not much opportunity for EPC companies in solar, but with the entry of some giants, the floodgates would open. Going forward, when larger players come in and the industry standardises, we expect major orders from solar too. Right now, there is no standardisation in solar EPC as the developers are from various countries, where businesses are done differently.

You were also expecting Transmission & Distribution (T&D) EPC orders from Europe?

We just got our first EPC order from Europe, and we had acquired a manufacturing unit in Dubai last year. This unit is poised to serve the European market. We will now start getting orders for supply of transmission towers, which is a large business for us in Europe.

What’s your order book size?

Our entire order book is about Rs 30,000 crore, of which about Rs 7,000 crore is L1 position (lowest bidder). On our tender pipeline, we have quoted about Rs 30,000 crore and would quote another Rs 30,000-35,000 crore across various businesses. Our civil business is doing well, and this year our orderbook is at about Rs 6,000 crore. Last year, revenue from civil business was Rs 1,100 crore, which we expect to double this year. Our focus on civil will continue in the industrial, residential properties, water pipeline and urban infrastructure such as metro rail.

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