The economic growth that we desire has already started, says Satish Kumar Agarwal
Kamdhenu Ltd, known for its TMT bars used in the construction industry, is seeing demand return to this business as well as it paints business, post-lockdown. Meanwhile, the company’s plans to hive off the paints business is at an advanced stage. Satish Kumar Agarwal, CMD, Kamdhenu Group, spoke to BusinessLine on this and other issues. Edited excerpts:
We are seeing India’s economic revival from the Covid-19 period, and the best thing is the revival has been the sharpest among large economies. In the domains we operate in ―steel and paints ― saw significant quarter-on-quarter improvement in volumes. Our average capacity utilisation has been gradually increasing through Q1 to Q4 FY21.
I am very optimistic about growth in the near future also because of government schemes such as ‘Housing for All’ by 2022, Pradhan Mantri Awas Yojana and Bharatmala Projects. These projects plus growth from the private sector will spruce up demand for the construction material used in housing and infrastructure. So, the economic growth that we desire has already started.
You have been very bullish on Kamdhenu’s paints business. What is the kind of growth you see for the industry?
Kamdhenu Paints is India’s leading player in the decorative paints segment. We have our own manufacturing plant in Chopanki (Rajasthan) to manufacture interior & exterior emulsions, stainers, colourants, and other speciality products. We also outsource median and low-range products like distemper, enamel and putty, from units in Rajasthan, Uttar Pradesh, Haryana and Punjab.
Paint, as a business, is growing like FMCG products now. The domestic paint industry is estimated to be worth around ₹50,000 crore, of which decorative paints account for more than 75 per cent and industrial paints the remaining around 25 per cent. Organised players enjoy around 65 per cent of the market in the overall paint industry in India.
This industry is witnessing around 18-20 per cent annual growth. However, at Kamdhenu, we are expecting to grow at a much faster rate at 30-40 per cent in the coming years. We closed FY2020 with revenue of around ₹226 crore, and expect to clock around ₹1,000 crore revenue by FY2026.
After the fire at your unit, partial operations have been restored. When do you expect the unit to go fully operational?
The factory is expected to be fully operation in April 2021.
What is the progress on your plans to hive off the paints business?
We are expecting to complete hiving off the paints business within FY2022. Currently, we have received some of the regulatory approvals. A few more are awaited; we expect to receive these within the next six months. The idea is to increase the focus on the paints business and to capture the sizeable market across the country.
Will you seek private equity investments in the paints business?
Currently, we are in the process of demerging the paints business from Kamdhenu Limited. Once the process is complete, we will look for private equity investment / strategic investment in the paints company.
What are the growth plans for your TMT bars business?
With the economy showing signs of improvement post lockdown, we are expecting recovery in infrastructure and construction sectors including in areas such as agriculture, railways, healthcare, roads, housing and affordable housing. The Group is actively looking at expanding its product portfolios and operations through the franchisee route. Any expansion will have to factor in market dynamics and we are evaluating the expansion as per the market demand and supply scenario. Kamdhenu is the largest TMT selling brand in India in the retail segment, having around 80 franchisee units across the country. We are operating on a franchisee-based asset light model. Currently, we have TMT bars capacity of around 38 lakh MT in India.
What is the overall brand revenue of the company?
Last fiscal, we closed the overall brand revenue at around ₹10,800 crore. We are expecting a total brand revenue of ₹22,000 crore by FY2023.
There was a comment from Road Transport and Highways Minister Nitin Gadkari on steel prices being on the higher side, thereby increasing the cost of infrastructure. What do you think about this?
There is a direct link between the price of the finished product and the prices of raw materials. If the prices of raw materials go up, the prices of finished products too will move northwards. Similarly, when the prices of finished goods decline, prices of raw materials decline. So, in that sense both these things are interlinked. Prices are not in our control, also because we work on a franchisee model.
Through the franchisee model we have manufacturing facilities across the country, which helps us reach the customers within 24 hours. It also helps us to reduce transportation cost, making our products more affordable without compromising on quality.