Kirloskar Electric - A Turnaround Bet?

Kirloskar Electric Company Ltd (kecl) is engaged in manufacturing electrical equipments like AC / DC motors, generators, transformers, switch gears etc…for the past 6 decades! Promoted by Vijay Kirloskar, (not very popular), but the company enjoys a great brand recall in south India.

Things went wrong when the company acquired Llyod Dynamowerke Gmbh, a german company at a steep valuation, supposedly to give Kecl a footprint in the European market along with complimentary engineering skills. This was some time in 2008-09.

From the good old days when the company was doing a turnover of 1200 crs with a net profit of 50 crs in 2009 & 2010, the company now in 2017 does a turnover of 575 crs and just about breaks even to make some paltry operating profit. Dont even ask about the bottom line, thanks to an interest outgo of 45 crs (on a debt of 280 crs), the net loss is almost 40 crs in march 2017.

Then why is this company interesting?

Firstly, the company has a huge land bank, worth well over the debt in hand which the company is looking to offload to pare the debt. This could make the company profitable.

Secondly, with the 6 odd manufacturing facilities, and tailwinds in the power & distribution space, the demand for Transformers could be quite huge, which by the way the company specializes in.

Thirdly, with the electrical vehicle becoming a reality, the company is one of the few companys who manufacture electric motors - a critical part for electric cars. Mahindra’s current elec car - E2O has sourced its electric motors from Kecl!

A lot of inefficiencies are being plugged in the manufacturing setup.

Kecl is also trying to make headway into railways & defense, as stated in the agm this year. The best part is that they have ample capacity so capex is not at all required.

At a market cap of 290 crs, I felt the risk reward ratio is favourable. However, when the turnaround will actually happen and the results turn positive is a difficult question.

Would like to hear from anyone who has knowledge on this company.

Disc: Invested.

5 Likes

If it makes Motors for EVS than the valuations will be different otherwise there is no charm in its current business…

It’s gonna be a long wait for the land deal, this has been doing rounds for some years now and if that happens only then the company could take care of its debt easily. Holding the stock for two years now for this story to become a reality and if anyone is planning to enter it mostly is going to be a test of Patience.

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I have been tracking and trading in this stock for more than 2 years now. My reading is :slight_smile:

  1. The land deal is not showing any traction. Management had transferred assets to a SPV ~2 years back and there is no movement at all.

  2. Management does not give any guidance on land sale. They did manage sale of treasury shares. They did a QIP as well - however this has not helped much.

  3. Every Quater, prior to result date the stock sees momentum anticipating a turnaround, which does not seem to be happening for more than 2 years now and then immediately after results the momentum dies down.

  4. This was recommended twice as Jackpot share on CNBC Awaaz, however the turnaround does not seem to happen - It is really testing patience of all.

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New JV with power drive of Coimbatore is seems to be a game changer for KECL.
JV Firm had the contract to supply 10,000 electrical vehicles EVs to TATA (It’s the supplier of TATA TIGOR) and its contribution also in the M&M EVs.
KECL website also indicating the same in its main page.

Let’s see how the new JV change the fortunes of KECL.

With thanks
Be and Make

KIRLOSKAR ELECTRIC COMPANY LTD

Red Flags (Annual Report 2018-19)

  • Auditors’ Qualification for Going Concern Assumption as Net Worth is eroded.

  • The Company’s Net Loss of 67.33 crores for FY 2018-19 and Rs. 75.69 crores for FY 2017-18. The loss for both the years is more than its market capitalization of Rs. 62.00 crores.

  • 75.81% of promoters Equity is pledged.

  • The Company’s borrowing of Rs. 222.07 cr. which is high compared to its market capitalization of Rs. 62.00 crores

  • The Company has not paid interest of Rs. 74.42 lakhs (Due but not paid)

  • Loans given to subsidiaries aggregating to 148.98. crores. Could be doubtful of recovery.

  • No provision made for demand of resale tax penalty of Rs. 5.27 crores Special Leave Petition pending in Supreme Court.

  • As on March 31, 2019, Excise Duty amounting to 1.76. crores and Provident Fund dues of Rs. 0.02 crores was outstanding for more than six months from the date they became payable.

  • The loan given by Axis Bank is classified as NPA and has been assigned to ARCIL

  • Negative Free Cash Flow

  • Ongoing litigation and contingent liabilities on account of guarantee / corporate guarantee / Sales Tax

  • There could be equity dilution on account of conversion of loan in equity

  • The only saving grace is immovable property which could have good market value. But the Company has already accounted revaluation reserve of Rs. 256.64 lakhs

Need to be cautious

3 Likes

https://www.bseindia.com/xml-data/corpfiling/AttachLive/71f35747-3ed0-4bcb-8241-c9d015a4153c.pdf

Co has announced that they have sold 32 acres of land for Rs. 100 crore to Marvel Group. Seems like a material positive that can help in a (potential) turnaround.

they have repaid some part of term loan also

Is anyone tracking this company? with recent Amazing result , turnaround story & reduced debt …it looks like company is worth looking again!!
Is this CG power making?

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Deserves a serious study… a possible turnaround situation… T&D sector is roaring… Transformer stocks like Shilchar have picked up greatly… other power sector stocks like ABB, Cummins, Siemens are up trending…

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Hear and watch the last Concall brother
My whole conviction from the stock is down the drain
You will end up laughing with sarcasm
And next very moment you will feel like selling the stock .

Am invested and confused

Please share insights !!

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Does anyone have any update on this company?, The mgmt is very shy to talk to investors.

Is there any news on this company? 20% UC today

What disaster numbers from KECL, and mgmt seems least bothered to give any clarification or updates.
Does anyone have any update on whats going on with the business?

Results not great - however, another turnaround story that is slowly unfolding. My kind of script.

If execution matches opportunity, then we are looking at a huge play.

EV :auto_rickshaw: and special Transformer play.

Not for the faint hearted.

Holding & dreaming.

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Any clues on why the company is up 10% today? From a cursory glance of Q4 results, I can see OCF +ve, no money to fund capex, but enough to trim borrowings & pay interest. A small warrant issue here would solve so many problems, but not sure if its in the offing?

What is the thesis in this counter besides the sectoral tailwinds due to T&D capex?

Transformer shortage leading to delay in Solar

KECL Power & Special Transformers Opportunity


Second bulk deal today by Ajay Upadhyay ji.First one was at 158.

From AR 2023-24

Dear Shareholders,

I am pleased to present 77th Annual Report of Kirloskar Electric Company Ltd for financial year 2023-24 on behalf of our Board of Directors. Despite a challenging operating environment, we have delivered positive financial results and continued to create value for all Stakeholders. As the Chairman of your Company, it is my privilege to reflect on our achievements, challenges and the path forward in this dynamic industry.

Similar to numerous other sectors, our industry is also undergoing a swift progression and novelty in technology. Throughout the year, even in the face of uncertain economic conditions we have overcome obstacles with tenacity and flexibility. The dynamic landscape of digitalization presents us with opportunities and challenges, encouraging us to adapt and advance. We upgrade the technology for our products from time to time to meet the market requirements and to keep our standing in the industry.

Three main pillars were at the center of these efforts: (1) enhanced capacity utilization; (2) cost optimization; and (3) stepping up our export focus. These pillars shaped our decisions and actions over the course of FY 2023–24. This year, we have improved capacity utilization and drastically optimized production costs for motors, transformers and switchgear.

One of our key achievements this year has been the successful supply of various transformers through EPCs for Bihar Water Supply Schemes and Punjab Water Supply Schemes, under Government of India’s prestigious initiative viz, ‘Jaljeevan Mission’. Besides this, we have successfully conducted short circuits tests in CPRI, on various transformers including 40MVA, 33/11.5kV, 16MVA, 11/3.45kV and supplied to various power projects including IOCL, NTPC, SAIL, Sikkim Power etc. Our notable achievements also include, the supply of our various products in association with leading EPCs, OEMs and OEAs catering to diverse applications and customer requirements strengthening our market position and driving sustained growth.

This year, we anticipate a dynamic growth trajectory fuelled by a number of key strategic considerations. Above all, our strong and robust order book for both customized product orders and standard products order establishes a solid groundwork for long-term expansion. These tailored solutions secure a consistent revenue stream, create long-lasting relationships and match our customers’ needs.

Our product reach in the mobility sector is wide and constantly expanding. India’s emphasis on domestic manufacturing and technological innovation offers us chances to expand and support the global mobility revolution. India’s EV market has experienced a sharp increase in business this year. As the demand for EVs increase, there is a great opportunity for our business to grow and for us to contribute to the success of the EV ecosystem in India. Your Company is in a perfect position to take advantage of the revolutionary changes occurring globally and ride the waves. Your Company’s proven manufacturing capabilities and preparedness for market competition put it in a strong position to take advantage of energy transition opportunities as they present themselves.

Establishing a work environment that fosters individual development, inclusivity and diversity is our goal as we strive to be the one of the best place to work for people who share our enthusiasm and values.

As we look ahead, our vision directs us and pushes us to achieve new standards of excellence, our objective keeps us grounded in providing all of our stakeholders with sincere and committed services, while our vision guides us forward by encouraging us to achieve even greater heights of excellence. Together, we will overcome obstacles, take advantage of chances and leave a lasting impression to ensure our success and prosperity on this life-changing journey.

I would like to conclude by sincerely thanking all of our stakeholders, including our esteemed bankers, suppliers, customers, dealers, channel partners, service providers, shareholders, employees and board members for their unwavering support, faith, and belief in our business. With our combined efforts, I have no doubt that we will keep breaking records, surpassing goals and leaving an enduring legacy.

Again, I want to thank you for your support and confidence.

Vijay R. Kirloskar

Executive Chairman


Distribution Transformers market is projected to grow at a CAGR of 8.7% between 2024 and 2032 due to the increasing urbanization and industrialization are expanding the demand for electricity distribution networks, necessitating the deployment of more distribution transformers.

KECL manufactures a wide range of Distribution & other transformers.