KEI Industries Ltd, a housing wire and cable maker, is looking to raise ₹600 crore by selling shares to qualified institutional buyers, two people aware of the development said, requesting anonymity.
“The funds raised will be utilized towards capacity expansion and towards debt repayment,” one of the two people said.
On 17 December, the company informed the exchanges that its board had approved raising of funds in one or more tranches, by way of qualified institutional placements (QIPs) for an amount not more than ₹1,000 crore.
QIP is a tool used by listed companies to sell shares, debentures, or any other security, other than warrants that are convertible into stocks, to qualified institutional buyers such as mutual funds and foreign institutions.
“The money raised is likely to be utilized to fund capex in order to sustain 20% growth in future. But no concrete plans have been finalized yet. The company can achieve peak revenues of ₹600 crore from existing capacities,” a 14 November research note from brokerage firm Prabhudas Lilladher said.
Founded in 1968 as a partnership firm under the name Krishna Electrical Industries, the company was converted into a public limited company in 1992 and was listed on the stock exchanges in 1995. The firm makes different types of cables, house wires and stainless-steel wires at its manufacturing facilities in Bhiwadi, Chopanki, Pathredi and Silvassa. It is also involved in engineering, procurement, construction (EPC) work in the power distribution space. Some of its key clients include Power Grid Corp. of India, Tata Power Ltd, NTPC Ltd, Larsen and Toubro Ltd, Suzlon Energy Ltd, Mahindra Solar, Hindalco Industries Ltd, Sweden’s ABB Group and Indian Railways.
“The (QIP) process is being managed by the investment banking division of Edelweiss Financial Services Ltd,” the second person said.
While an Edelweiss spokesperson declined to comment, email and calls made to Anil Gupta, chairman and managing director of KEI Industries, were not answered.
As on 30 September, the company’s total debt stood at ₹670 crore, while its current capacities were operating at 83% utilization for cables division, 68% for housing wire and 89% for stainless steel wires, according to the investor presentation on its website.
Last year, the company allocated capital expenditure of about ₹100 crore for the ongoing of expansion housing wires division at its Silvassa facility, which started from July 2019 and its second phase is likely to be completed by March 2020, according to Prabhudas Lilladher’s report. “The management has guided a capex of about ₹1,200 crore per annum to be funded through internal accruals to expand existing capacities,” it said.
The firm had an order book of ₹4,370 crore, of which EPC comprised ₹2,033 crore, cable formed ₹1,190 crore, electric high voltage cables formed ₹628 crore and L1 (lowest bidder status) orders for cable wires were worth ₹128 crore.
The firm’s order book for exports comprised orders worth ₹521 crore as of second quarter ended 30 September, the report noted, lower than ₹750 crore during the same period in the previous fiscal year, as the company had already booked domestic orders and was therefore unable to take export orders due to capacity restrictions, the report said.