Will Take 4-5 Years For Any New Player To Make Inroads In The Cables & Wires Market: KEI Industries
Summary
TLDRIn a dynamic discussion on the competitive landscape of the wires and cables industry, Anil Gupta, Chairman and Managing Director of KEI Industries, provides insights into the market's future amidst new entrants like Adani and Ultratech. Gupta highlights the industry's long-term growth potential, forecasting a 20% annual growth rate over the next five years. He emphasizes the challenges new competitors face in building production capabilities and gaining customer trust, stressing that KEI’s established position and strategic capacity expansion will help it maintain its market leadership despite these disruptions.
Takeaways
- 😀 Adani Group and Ultratech have entered the highly competitive cables and wires industry, intensifying competition in the market.
- 😀 Anil Gupta, Chairman and Managing Director of KEI Industries, believes that new entrants will take 4-5 years to build production facilities and establish a presence in the market.
- 😀 KEI Industries holds a market share of around 12% and expects to increase it to 13-13.5% in FY 2025, while competitors like Polycab hold a market share of 26%.
- 😀 KEI Industries is investing 2,000 crore INR in capacity expansion, aiming for a 60-70% increase in production by next year.
- 😀 New market entrants will face challenges in establishing themselves, as they need time to understand the market and build customer trust, which is crucial in the cable and wire industry.
- 😀 Anil Gupta emphasizes that the cables and wires industry is not like cement or paint industries, where consolidation happens more rapidly. It requires time and trust to establish a brand.
- 😀 The expected timeline for new entrants to establish production facilities and reach full-scale capacity is approximately 4 years, including plant construction and stabilization.
- 😀 KEI Industries has a strong asset turnover of 6 times, and their new capacity at the Sanand plant is expected to increase this turnover to 3 times initially, gradually reaching 3.5-4 times within 1.5 years.
- 😀 KEI's long-term goal is to reach a sales capacity of 17,000-18,000 crore INR by FY 2027-2028 and potentially 25,000 crore INR by FY 2030-2031, with a significant portion coming from exports.
- 😀 The domestic cable and wires market is expected to grow significantly, and KEI Industries aims to maintain a 20% growth rate annually, even as new players enter the market.
- 😀 Despite potential disruptions, KEI Industries expects to maintain its margins at around 11% over the next five years, factoring in the competitive challenges from new entrants and the broader market dynamics.
Q & A
How long will it take for new entrants like Ultratech and Adani Group to scale up their production and establish a presence in the market?
-Mr. Gupta estimates that it will take at least four to five years for new entrants to build their production facilities, stabilize production, and gain market acceptance.
What is Mr. Gupta's outlook on the disruption caused by new competitors like Ultratech and Adani Group in the wires and cables industry?
-Mr. Gupta believes that while the new players will create competition, the market is large enough to absorb them. He emphasizes that it will take time for them to scale up, and the Indian market is growing significantly, which can accommodate new entrants.
What market share does KEI Industries hold currently, and what are its future plans?
-Currently, KEI Industries holds approximately 12% market share. Mr. Gupta expects this to grow to around 13-13.5% as the company scales up capacity with a 2,000 crore capex, increasing its production capacity by 60-70% over the next year.
How long does it take for a new player to set up a wires and cables plant in the current market conditions?
-It takes about three years to build and complete the factory, followed by one more year to stabilize production and workforce. This makes the total time to market about four years.
What is KEI Industries’ plan to expand its capacity?
-KEI Industries is working on expanding its capacity through large-scale investments, including a 2,000 crore capex to increase production. The company plans to scale its capacity to around 17,000-18,000 crore by FY27 and further expand to 25,000 crore by FY31.
How does KEI Industries plan to manage its capacity utilization with the new market entrants and increasing competition?
-Mr. Gupta remains confident that KEI will maintain its growth rate, citing the company's strong position in the market and its deep understanding of the business. He believes newcomers will face challenges in gaining customer approval and market share.
What is KEI Industries’ current asset turnover, and what is the expected change with the new capacity?
-KEI Industries currently has an asset turnover of approximately six times. With the new capacity at Sanand, the asset turnover will initially be around three, but over the next 1 to 1.5 years, it is expected to improve to around 3.5 to 4 times.
What are KEI Industries’ projections for its revenue growth over the next five years?
-KEI Industries is projecting a 20% compound annual growth rate (CAGR) in revenue over the next five years, driven by both domestic and export market growth.
What is the impact of US tariffs on KEI Industries' business?
-Mr. Gupta mentions that KEI's market share in the US is minimal, amounting to around 3-400 crore annually. While tariffs may be imposed, KEI does not expect a significant impact on their business in the short term.
What are KEI Industries’ margin expectations despite the increased competition?
-Mr. Gupta aims to maintain an operating margin of around 11%, even in the face of potential disruptions from new competitors. He believes this is achievable due to the company's strong position and established presence in the market.
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