KPTL

Delivering a consistent performance

Engineering major Kalpataru Power Transmission Limited (KPTL), set up in 1981, has been one of the long-standing engineering, procurement and construction (EPC) players in the power and infrastructure industry. The company has, of late, also been strengthening its presence in overseas markets.

It made a huge foray into Nordic markets with the acquisition of an 85 per cent stake in the Swedish firm LinjemontageiGrastorp AB (LG) for an enterprise value of $24 million. KPTL is already a major exporter to several countries and receives a sizeable chunk of orders from overseas markets.

“This acquisition will enhance KPTL’s position in the global transmission and distribution (T&D) market while underscoring our vision of being a local player in the global environment. It also provides a compelling value proposition and brings together two winning teams with strong values and successful track records. The acquisition provides us with an opportunity to capture the local Swedish and Norwegian markets, and  expand our presence in Nordic countries and the rest of Europe,” said Manish Mohnot, managing director and  chief executive officer, KPTL, in a recent conference call.

Operations

KPTL has a presence in over 50 countries. The company is in the business of offering turnkey solutions for extra high voltage (EHV) transmission lines up to 800 kV. This involves the designing, fabrication, erection and construction of EHV transmission lines. T&D is a major business vertical for the company and contributes 80 per cent to the total revenue. It also has one of the largest tower manufacturing plants in India with an annual production capacity of 180,000 metric tonnes.

KPTL has two major operating subsidiaries – JMC Projects (India) Limited and Shree Shubham Logistics Limited (SSL). JMC is a full-scale infrastructure EPC player in all high-growth verticals such as roads and flyovers, water and railways, and industrial buildings while SSL offers storage infrastructure to a wide range of market participants dealing in agricultural and non-agricultural commodities, including farmers, traders, aggregators, processors and government agencies.

The agreement to acquire an 85 per cent equity stake in LG was signed in March 2019. LG is an EPC company specialising in power supply solutions and services for electricity networks within the voltage range of 0.4 kV-400 kV. It has three business verticals – EPC for substations, T&D network services, and O&M services for electricity networks. The company’s average return on capital has been over 25 per cent for the past two years.

In addition, KPTL has set up two biomass plants in Rajasthan –  a 7.8 MW plant at Padampur and an 8 MW plant at Uniara. Both the plants consume agricultural waste and crop residue as inputs.

Order book

KPTL’s outstanding order book stood at about Rs 140.68 billion, as of March 31, 2019, with an order inflow of Rs 83.4 billion in 2018-19. The company’s order book has been in a steady state over the past four years, with orders increasing from Rs 89 billion in 2015-16, Rs 90 billion in 2016-17, Rs 124 billion in 2017-18 to Rs 141 billion in 2018-19.

The company’s T&D  business (including overseas and domestic) has a major share (56 per cent) in the total order book. This is followed by the railways (27 per cent) and the pipeline industry.

As of March 2019, the overseas T&D business order book was around Rs 57 billion (compared to Rs 47 billion, as of March 2018); with orders from Africa making up the largest share (41 per cent). The domestic T&D business order book was at around Rs 23 billion, as of March 2019 (compared to Rs 39 billion, as of March 2018), of which the segment-wise share of orders was 29 per cent from the private sector, 46 per cent from state utilities and 25 per cent from Power Grid Corporation of India Limited.

The share of railways in the cumulative order book has significantly increased in the past two years, from only Rs 9 billion as of March 2017 to Rs 38 billion as of March 2019, on the back of opportunities in railway electrification. In 2017-18, the company was able to electrify about 1,044 km of tracks. In 2018, KPTL completed the Mansi-Madhepura electrification project within a time span of 10 months, making it one of the fastest electrification projects.

KPTL has seen significant growth in its oil and gas pipeline business in the past two years, with its order book witnessing an increase in orders from Rs 5 billion, as of March 2017, to Rs 23 billion, as of March 2019.

Transmission assets

The company has a portfolio of four power transmission line projects on a build-own-operate-transfer (BOOT) basis. The total equity investment by KPTL in these projects is Rs 3,670 million and their cumulative project cost is Rs 32 billion.

Two of the projects are operational – the 100 km Jhajjar line (Haryana) commissioned in 2012, in which KPTL has a 51 per cent stake (the remaining share is owned by Techno Electric), and the fully owned 240 km Satpura line, commissioned in 2015.  The system availability of the Jhajjar and Satpura transmission lines was 98.17 per cent and 99.99 per cent, respectively, during 2018-19.

The other two under-construction lines are – the Alipurduar line in West Bengal and Bihar, (which is being built to transfer power to Bhutan and is expected to commence operations in 2019-20), and the Kohima-Mariani line, which is being built for the north-eastern grid (in which Techno Electric owns a 26 per cent stake). The Kohima-Mariani line is expected to be commissioned in 2020-21.

According to news reports, KPTL is likely to sell these transmission assets to Adani Transmission Limited. The deal, which is currently under discussion, is expected to be valued between Rs 14 billion and Rs 15 billion.

Financial performance

The company has been consistently delivering good performance in recent years. In terms of the total revenue (stand-alone), the company registered a growth of 23.1 per cent in 2018-19 over that in the previous year. The total revenue went up from Rs 57.79 billion in 2017-18 to Rs 71.15 billion in 2018-19. Since 2013-14, the company’s total revenue has increased at a CAGR of 14.24 per cent. Profit after tax (stand-alone) was recorded at Rs 4.01 billion in 2018-19, witnessing an increase of 23.13 per cent over the previous year. Since 2013-14, the company’s profit after tax has grown at a CAGR of 28.67 per cent.

Outlook

In the T&D segment, KPTL is foreseeing a Rs 3 trillion opportunity over the 2017-22 period in India and SAARC, and an overall capex of $334 billion over the 2018-25 period.

According to brokerage reports, KPTL’s order book provides strong revenue visibility. Moreover, new orders entering the execution stage are expected to help KPTL report a high double-digit revenue growth during 2019-20. According to the company’s management, 40 per cent of its Rs 100 billion order inflow guidance during 2019-20 will be from the railways and the pipeline segment, and  T&D will account for the rest. Moreover, KPTL has L1 position for orders of over Rs 15 billion, providing further order inflow visibility.

KPTL aims to scale up its business through LG’s EPC and technology expertise in the 400 kV Swedish market, which has an opportunity size of $800 million-$900 million. This will lead to improvement in margins through synergies created by low-cost Indian manufacturing base and large T&D project capabilities of KPTL. Meanwhile, proceeds from the monetisation of its transmission line assets are expected to reduce the company’s debt as well as enable it to undertake acquisitions in smaller markets.

Overall, considering the government’s focus on renewables, last-mile connectivity through schemes such as 24×7 Power for All and Saubhagya, green energy corridors and system strengthening, KPTL can expect a whole new set of opportunities to open up.

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