Kolkata headquartered Skipper Ltd sees robust growth in its power transmission and distribution (T&D) business and hopes to establish itself as a brand among consumers to boost its fledgling polymer pipes and fittings business, Executive Director Sharan Bansal told Moneycontrol.
Bansal, who is credited to have initiated the power transmission vertical at his family run Skipper in 2003, sees the T&D business growing at 25 percent over the next three years.
While the company is present in 65 countries through its T&D products business, it is charting new territory with its polymer business which accounts for 20 percent of its revenue but where margin remains low. The company has roped in former India skipper MS Dhoni to build its brand and drive the margins to “double digits”. Bansal shared the game plan for capex and growth. Edited excerpts:
You have given a growth guidance of 25 percent compounded annual growth rate (CAGR) over three years. What’s the opportunity that you are looking to capture?
We've been seeing a gradual uptick in renewable investment globally for the last four or five years. After the pandemic and the Russia-Ukraine war, the commitment towards renewables is far greater. That's what's really driving all countries, particularly developed countries, which were not so active in the overall renewable investment space earlier. This has resulted in investment in power transmission where we are active. For every investment in generation, almost 50 percent should be invested in transmission and distribution (T&D) to ensure connectivity.
Worldwide there are a lot of renewable projects which are not generating today for want of evacuation. Skipper is an integrated transmission tower producer and we have full end-to-end backward and forward integrated within our company. In this space, the biggest competition for us is from Chinese and Turkish players. But more and more countries don't want to work with China; that’s a big advantage which we are starting to enjoy post-pandemic. In India too, not much work was happening in the T&D space in the last 5-6 years, we are seeing an uptick now. There is a big pipeline of projects coming up as the Government of India and Central Electric Authority came up with an ambitious plan of about Rs 2.4 lakh crore investment in transmission till 2030 to connect about 500 gigawatt of renewable power.
Your order book was at Rs 6,074 crore as of end-September, how much of your current order book is for the products business and how much is for turnkey engineering, procurement and construction (EPC) projects?
Almost about 70-75 percent of our order book is products and about 25 percent would be EPC. We are a product manufacturing company. From time to time, we will bag EPC orders, but we will definitely remain focused on the product business.
The T&D space in India has local companies like KEC International and Kalpataru Projects International Ltd and then there are international players too who are looking at bagging more jobs. Is the competition intense on the engineering side?
The competition has always been there. We are a competitive company. We have cost advantages. I am sure our peers also have certain cost advantages in their area, and we continue to compete. Our focus is on engineering product manufacturing. We will take turnkey projects on an opportunity basis where we get projects above a certain margin. But will we become a full-fledged EPC player tomorrow? Probably not.
What’s the revenue mix right now and how different are the margins in each business?
Our current mix is roughly about 75 percent from engineering products, 20 percent from polymer products, and 5 percent from infra as of FY23. We got some big orders in the infrastructure business and the share may go up from 5 percent to maybe 15-20 percent. If we don't take on more infra projects, it may go down to 5 percent again; what we are confident about is that the growth in engineering and polymer will continue. In terms of EBITDA margin, engineering products stand at 12 percent, polymers at 10 percent and infra at about 5-6 percent. Polymer business margin is still low because our brand is still getting more acceptance in the market. We recently launched a large ad campaign with cricketers MS Dhoni and Chris Gayle, that's giving us some visibility. It will not be long before we become a double-digit margin in this business. We see polymer as a B2C (business-to-consumer) business overall.
You are trying to build a B2C brand, how much do you plan to invest in it?
There is definitely going to be some investment into the brand building but we do not expect it to cross more than 2 percent to 3 percent of our top line of the polymer business. You can assume Rs 12 crore to 18 crore of spend on the brand building side.
Your company is present in 65 countries. What’s the capacity expansion plan?
We have been investing in capacity debottlenecking and range expansion in the last few years. We haven't gone for a capacity expansion because the capacity utilisation was low. This year, thanks to the order book, we should see at least 70 percent-75 percent capacity utilisation. By next year we will probably take up some amount of capital expenditure for capacity expansion but not this year. The capex in FY24 would be around Rs 70 crore-75 crore, looking at the opportunity, we could look at Rs 300 crore-400 crore capex over the next three years starting FY25.
At the beginning of FY24, Skipper roped in cricketer MS Dhoni as a brand ambassador. Have you started seeing the financial benefits of this?
MS Dhoni is a fantastic brand. As soon as he signed us up, he won the IPL so he upped his brand peak and we lucked out. I think all of us agree that no one would feel safer than when it has MS Dhoni as a skipper; that's where there is a lot of brand resonance. We are seeing very positive feedback from our trade partners, retailers, and dealers. There is a lot of interest from potential dealers and new partners. The ultimate long-term objective is to be a brand that grows from strength to strength and helps drive the margins. It's probably too premature for that. Brand building needs to be done over a sustained period, which we are fully committed to doing. We are seeing an increase in volumes for sure; we are quite confident of achieving 40-50 percent volume growth this year, which probably would not have been possible had we not launched the campaign.
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