KEI Industries — a cable maker betting a year of patience on one big new plant

The Short Version

KEI is one of India’s larger wire-and-cable makers — the company behind a lot of the heavy power cabling in factories, substations and buildings, plus household wires sold through dealers. In the year just ended (FY26) it grew sales 21% to ₹11,748 crore and profit 32% to ₹918 crore, kept its usual steady ~10–11% margin, and stayed almost debt-free. But the honest story of the year is that KEI grew mostly because copper got more expensive (which inflates the rupee value of each cable) rather than because it sold dramatically more — actual volume grew only about 6%. The reason is straightforward and, for a patient owner, not alarming: KEI’s big new factory at Sanand slipped roughly six months, so the extra capacity that’s meant to drive the next leg of growth simply wasn’t ready yet. The whole investment case rests on that plant filling up over the next two to three years.

What This Company Actually Does

Wires and cables are the plumbing of electricity — and KEI makes the full range, from thin household wiring up to the heavy “extra-high-voltage” (EHV) cables that move power across long distances, the most technically demanding and best-paying end of the business. It sells two ways: through a network of about 2,100 dealers to retail customers (electricians, small builders), and directly to big institutional buyers — power utilities, EPC contractors, solar developers, metro projects. It also runs a small turnkey-construction (EPC) arm, but that’s being deliberately wound down because it’s low-margin and ties up cash.

The economics are simple to grasp: copper and aluminium are the main inputs, the product is part-commodity and part-trust (approvals and reliability matter for the heavy stuff), and the company earns a steady ~10–11% operating margin on large volumes. Over the past decade KEI has done two quietly impressive things — grown revenue almost six-fold, and paid down nearly all its debt, which is why profit has grown much faster than sales (less interest to pay). Promoters hold a steady 35%; domestic mutual funds have been buying as foreign funds trimmed. The one number a careful reader notes: the stock trades at about 55 times earnings, a rich price that assumes the growth plan delivers.

The Long Game

KEI is doing what most of its industry is doing right now — spending heavily to build capacity ahead of an expected boom in electricity demand. Its centrepiece is a large greenfield plant at Sanand, Gujarat (roughly ₹2,000 crore), capable of adding about ₹6,000 crore of annual sales once full — including the high-value EHV cables and special solar wires. That’s more than half the company’s current size in new capacity. The plant is being funded partly by a share sale (a QIP) done in FY25, which is why the balance sheet swelled and free cash flow has been negative two years running — the classic signature of a company investing through its own growth phase. Management has another ~₹2,000 crore of capacity (at Bhiwadi and Baroda) planned behind Sanand.

The plan management repeats: grow ~20% a year over the next three-to-five years, lift exports from a small base toward 17–20% of sales (entering the US and Europe), keep margins around 11% in the near term and push them higher (toward 11.5%+) once Sanand fills and the export mix richens — a margin step-up they now place around FY28. Three quiet structural shifts support the quality of that growth: the mix is moving toward higher-margin retail (from 40% of sales to 52%), exports are growing fast off a low base, and the low-margin EPC arm is shrinking by choice.

The reason to give the plan time is the track record — six-fold revenue growth, debt paid off, margins held steady through copper’s ups and downs. The reason for patience specifically this year is that the growth engine (Sanand) is still being switched on.

The Year, Told Simply

Every quarter of FY26 told a version of the same story: solid value growth, modest volume growth, exports flying, and the Sanand timeline being nudged back.

First quarter (reported July). Sales up 25%, profit up 30%, exports up over 60% (cable exports more than doubled off a low base). Management guided to 18–19% growth for the year and “20%-plus from next year,” and said Sanand’s first phase (ordinary cables) would start production by end-September, with sales showing from the December quarter. The CMD’s framing was characteristic: “we are a little conservative in giving guidance. Our performance will be far better.”

Second quarter (reported October). Sales up 19%, profit up 31%, exports at an all-time high (up 96%) — notably, KEI deliberately throttled its domestic institutional growth to about 3% because that business is lower-margin and it preferred to chase exports and retail. Guidance was nudged up to “>20%” for the year. But Sanand slipped: Phase 1 now “commercial by November” (a ~4-month delay), and the EHV phase pushed out about nine months. Management was upfront that margins stay flat around 10–10.5% until Sanand is fully running, after which a 1–1.5 percentage-point margin gain should come (around FY28).

Third quarter (reported January). Sales up 19%, profit up 42%, exports still strong. The capacity constraint was now visible in the numbers — cable plants were running at ~76%, essentially full on the old footprint. Management held its 20%-plus aspiration and the FY28 margin-expansion timing.

Fourth quarter and the full year (reported May). A record year on paper — sales ₹11,748 crore, profit ₹918 crore — but management was candid that net volume grew only 6.2% because Sanand had slipped about six months in total. For FY27 it guided to 17–18% volume growth (most of it finally coming from Sanand plus another plant), 20% value growth, exports back toward 20% of sales, debt-free funding, and ₹600–700 crore of annual capex from internal cash. The remaining QIP money (₹385 crore) goes into Sanand’s second phase, due by Q4 FY27.

The pattern across the year is the one a long-term investor should read calmly: the business performed steadily (margins rock-steady at ~10–11%, exports compounding, mix improving, debt near zero), while the growth acceleration kept getting pushed right as the new plant took longer than hoped. That’s a timing story, not a deterioration story — but it does mean the payoff has been deferred, and the rich valuation is paying for a plant that hasn’t yet proven it fills up.

What a Patient Investor Would Watch

On a known multi-year clock. Sanand is the whole story: Phase 1 (ordinary cables) ramping through FY27, the high-value EHV line live by around March 2027, and full utilisation roughly three years out. Behind it, the second-phase Sanand capex (Q4 FY27) and the further Bhiwadi/Baroda plants. The margin step-up to 11.5%+ around FY28 as that capacity fills and exports richen the mix. And exports climbing from a small base toward the 17–20% goal as the US and Europe open up.

What could genuinely matter. The single biggest watch-item is execution on Sanand — it has already slipped six months, and the FY27 volume guidance (17–18%) depends almost entirely on it ramping on the new schedule. Copper will keep making any single quarter’s revenue growth look faster or slower than the underlying volume — the honest number to track is volume, not value. Two years of negative free cash flow are expected during the build, but worth confirming they reverse as Sanand earns. And the price (≈55× earnings, 7.65× book) leaves little room if the ramp slips again.

The simple test for next year. Did Sanand actually ramp — and did volume growth finally jump to the high-teens? Did the EHV line come live around March 2027? Did exports keep climbing toward the 17–20% goal? Did margins start their move toward 11.5%? Did free cash flow turn positive as the spending eases? Five questions, all answerable from next year’s filings.

The Four Checks

1. Quality and moat. A well-run business in a half-commodity industry — the moat is real but modest. On the heavy end (EHV and HT cables), approvals, certifications (UL for the US, BASEC for the UK) and a track record with utilities create genuine switching friction; on the retail end, a ~2,125-dealer network with channel financing covering ~60% of B2C sales is an asset that took years to build. But the product itself is copper and aluminium with a brand wrapped around it, the industry has several capable rivals, and KEI’s own pass-through pricing model — margins pinned at 10–11% for a decade through every copper cycle — tells you nobody here has real pricing power. Call it execution and relationships, not a fortress: enough edge to keep earning decent returns, not enough to keep new capacity (the whole industry is building it) from eventually pressing on everyone’s margins.

2. Returns on incremental capital and runway. This is a capex compounder mid-build, and the returns are good but visibly easing. ROCE has slid from roughly 29% in FY18 to 21% in FY25 and 20.1% in the June 2026 snapshot; ROE sits at 14.8%, temporarily depressed by the FY25 equity raise that nearly doubled the equity base before the new plant earns anything. The runway is the more convincing half: Sanand alone is built to add about ₹6,000 crore of annual sales — more than half the current company — with another ~₹2,000 crore of capacity planned behind it at Bhiwadi and Baroda, all riding India’s electrification, data-centre and grid build-out. If the new capacity earns anything like the existing ~20% ROCE, a rupee retained here works hard. The honest caveat is that this is currently a promise: FY26 volume grew only 6%, and the proof that Sanand fills at those returns arrives over FY27–28, not yet.

3. Capital allocation for the stage. Mostly textbook for a company at this stage. A decade of disciplined deleveraging (interest cost down from ₹121 crore in FY15 to near-irrelevant), the low-return EPC arm deliberately shrunk from ₹562 crore to ₹343 crore of revenue, dividends kept token (~5% payout) while reinvestment opportunities are rich, and ₹600–700 crore of annual capex now funded entirely from internal cash. The one genuine quibble is the FY25 QIP — roughly ₹2,000 crore of equity raised by an almost debt-free company that could have borrowed cheaply instead, diluting shareholders (promoters slid from 37% to 35%) and parking ₹500–600 crore as a standing cash buffer. Selling stock at 50-plus times earnings is at least cheap currency, and management has committed the remaining ₹385 crore to Sanand’s second phase — so call it conservative to a fault rather than wasteful. No buybacks in the record, which at this valuation is the right answer anyway.

4. Price. Demanding. As of the June 2026 snapshot the stock trades at ₹5,212 — 54 times earnings and 7.4 times book — against a business earning 20% ROCE, 14.8% ROE and a structurally capped 10–11% operating margin, with a dividend yield of 0.09%. That multiple already pays for the 17–18% volume growth management has guided, the FY28 margin step-up, and a clean Sanand ramp — a plant that has already slipped six months, twice. Even granting the five-year profit CAGR of 27.8%, paying seven times book for a pass-through manufacturer leaves essentially no room for a third delay, a price war as the industry’s collective new capacity lands, or copper simply going the other way. A fine business at a price that assumes the next three years go exactly to plan.

Sources

• Concall transcripts (4): Q1 FY26 (Jul 23, 2025), Q2 FY26 (Oct 16, 2025), Q3 FY26 (Jan 22, 2026), Q4 FY26 + full-year (May 5, 2026) — BSE filings, converted to markdown.
• Annual reports (3): FY23, FY24, FY25 sections — the FY25 report’s clearest signal was the mix shift to retail (46%→52%), the EPC wind-down, and the gearing collapse from the equity raise.
• Screener.in snapshot: quarterly and annual tables, ratios, shareholding — fetched 2026-06-06 (logged-out session).
• Research files: vault/Sources/Earnings/KEI Industries Ltd/ — raw transcripts, AR sections, snapshot, per-document digests (not published).