KP Green Engineering Limited
Company
| Website 🔗 |  |
| Business Activity | Manufacture |
| Division | Fabricated Steel |
| Sub-class | Infrastructure and Renewable Energy Solutions |
| Location | HQ – Surat, Gujarat Manufacturing Units – Vadodara, Gujarat Bharuch, Gujarat |
| Establishment Year | 2001 |
Management
| Managing Director | Dr. Farukbhai Gulambhai Patel |
| Educational Qualifications | Honorary Doctorate in Innovation, Talent & Creativity Management from American East Coast University, New York, USA |
| Experience | Over 15 years in the renewable energy sector |
| Annual Salary | ₹ Not Available |
| Total Number of Employees | 81 |
About
KP Green Engineering Limited (KPGEL) specializes in the manufacturing of fabricated and hot-dip galvanized steel products. The company’s offerings cater primarily to the infrastructure and renewable energy sectors.
KPGEL emphasizes providing end-to-end solutions, from engineering and design to fabrication, galvanization, and deployment.
Products:
KPGEL’s product portfolio includes a variety of steel products, each serving specific functions in infrastructure and renewable energy sectors:
Lattice Tower Structures:
These structures, made of steel sections in a lattice pattern, are used in power transmission, telecommunications, and wind turbines.
Substation Structures:
These include gantries and equipment support structures used in electrical substations.
Solar Module Mounting Structures and Solar Trackers:
These systems are designed to support and orient solar panels for optimal energy production.
Metal Beam Crash Barriers:
These galvanized steel barriers enhance road safety by preventing vehicles from leaving the roadway.
HV Disconnector Structures:
These structures support high-voltage disconnectors used in power systems.
Cable Trays:
These systems are used to manage and protect electrical cables in various settings.
Galvanized Earthing Strips and Flats:
These components are essential for electrical grounding systems.
Roofing Channels:
C and Z purlins provide structural support in pre-engineered buildings.
Services:
Fault Rectification Services:
KPGEL offers repair and maintenance services for optical fibre cables used in telecom networks.
Galvanizing Job Work:
The company provides galvanizing services for clients’ materials.
Solar Rooftop Installation Services:
KPGEL installs solar panels on rooftops, including procurement of panels and mounting structures, installation, and testing.
Clients:
Construction and infrastructure companies that utilize KPGEL’s fabricated and galvanized steel products for various construction and infrastructure projects.
Utilities and energy sector companies that use KPGEL’s products in power transmission, distribution, and generation, including substation structures and transmission line towers.
Original Equipment Manufacturers (OEMs) that incorporate KPGEL’s products into their equipment and systems, such as solar panel manufacturers using the company’s solar module mounting structures.
Telecom operators benefit from KPGEL’s fault rectification services for their optical fibre cable networks.
Raw Materials and Suppliers:
The company’s raw materials primarily consist of various metals, including steel, aluminium, and zinc-based metals and it employs a dual-sourcing strategy for these materials:
Domestic Suppliers:
The company procures a significant portion of its base metals and materials from established domestic suppliers within India.
Customer-Supplied Materials:
In some cases, particularly for galvanizing job work, the company utilizes raw materials provided directly by its clients. This approach offers flexibility to clients who may have specific material preferences or requirements for the galvanization process.
Manufacturing Process:
Raw Material Procurement:
Sourcing metals from domestic suppliers or utilizing materials provided by clients for job work.
Fabrication:
Utilizing CNC machinery for precise fabrication of steel components.
Hot-Dip Galvanization:
Applying a protective zinc coating to steel through a multi-stage process involving surface preparation, galvanizing, and post-treatment.
Ongoing Projects
As of December 31, 2023, KPGEL had 69 ongoing projects with a total order book value of approximately ₹233.92 Crores.
Business Flowchart
Revenue – Category
Revenue – Region
Audit and Legal
Related Party Transactions:
The percentage of related party transactions relative to total revenues for the period ending on September 30, 2023, was 26.52%
Auditor’s Remarks:
The auditors provided an unqualified opinion on the restated financial statements of KP Green Engineering Limited.
MSMED Act Interest:
The company has outstanding dues to Micro & Small Enterprises but has not provided for interest on overdue amounts as required by the MSMED Act, 2006.
Balances Subject to Confirmation:
The balances of sundry creditors, sundry debtors, loans, advances, and deposits are subject to confirmation and reconciliation.
Contingent Liabilities:
The company does not have any contingent liabilities that have been recognized in its financial statements.
Legal Cases:
By the Company:
Commercial Execution Application No. 242/2022:
The company has filed an application against the Proprietor of Mukesh Engineering Industries seeking the execution of an arbitration award that granted them the recovery of ₹5.5 Crore along with 12% p.a. interest from April 27, 2016, until the date of payment.
Special Civil Suit 92/2014:
The company is involved in this suit against Star Asia Offshore Pvt. Ltd. and others. The case concerns a dispute over the ownership and possession of a Cutter Suction Dredger Machine. The company is seeking ownership, a no-objection certificate from the bank, and a permanent injunction against the defendants.
Tax Disputes:
Amounts related to various tax disputes are as follows:
Indirect Tax: ₹51.60 Lakhs
Direct Tax: ₹35.92 Lakhs (across multiple assessment years)
Workmen Compensation Act: ₹17.05 Lakhs
SWOT Analysis
Strengths
| End-to-End Solutions: KPGEL’s in-house fabrication and galvanization capabilities allow it to offer comprehensive solutions to clients, potentially enhancing customer satisfaction and loyalty. |
| Strong Financial Performance: The company has demonstrated consistent growth in revenue and profitability, indicating a healthy financial position. |
| Accreditations and Certifications: The company’s ISO 9001:2015 certification and accreditations with GETCO and MSETCL enhance its credibility and demonstrate its commitment to quality. |
| Focus on Quality Control: The company’s in-house quality control laboratory helps ensure product quality and customer satisfaction. |
Weaknesses
| Customer and Supplier Concentration: The company’s reliance on a few key customers and suppliers poses a risk if these relationships are disrupted. |
| Dependence on Single Manufacturing Facility: The company’s current reliance on a single manufacturing facility creates operational risks and limits its production capacity. |
| Limited Geographic Diversification: The majority of the company’s revenue currently comes from the Gujarat region, making it vulnerable to regional economic fluctuations or policy changes. |
| Working Capital Management: The company has experienced negative operating cash flow in the recent past, indicating potential challenges in managing its working capital effectively. |
Opportunities
| Growth in Infrastructure and Renewable Energy Sectors: The Indian government’s focus on infrastructure development and renewable energy presents significant growth opportunities for KPGEL. |
| Expansion into New Markets and Products: The company’s plans to expand its manufacturing capacity and product portfolio could open up new revenue streams and reduce dependence on existing products and markets. |
| Government Initiatives: Various government initiatives, such as the Production Linked Incentive (PLI) scheme and the focus on infrastructure development, could create favourable market conditions for KPGEL. |
| Increasing Demand for Steel: The growing demand for steel in India, driven by infrastructure development and other sectors, offers a favourable market outlook for KPGEL. |
Threats
| Intense Competition: The company faces competition from both domestic and international players, which could pressure pricing and profitability. |
| Raw Material Price Volatility: Fluctuations in the prices of raw materials, such as steel and zinc, could impact the company’s profitability if it is unable to pass on increased costs to customers. |
Porter’s Five Forces1
| Threat of New Entrants | MODERATE – HIGH |
| The steel fabrication and galvanization industry has relatively low barriers to entry in terms of technology and capital requirements. However, establishing a strong reputation, building customer relationships, and achieving economies of scale can be challenging for new entrants. KPGEL’s accreditations, certifications, and experience in the industry provide some barriers to entry, but the threat of new competitors, particularly those with significant resources or innovative technologies, remains. |
| Bargaining Power of Suppliers | MODERATE |
| KPGEL sources its raw materials, primarily metals, from domestic suppliers. The company emphasizes careful assessment of supplier reliability, suggesting some level of supplier selectivity. However, the steel industry is susceptible to fluctuations in raw material prices, which could impact KPGEL’s costs and profitability if it is unable to pass on these costs to customers. |
| Bargaining Power of Buyers | MODERATE |
| While KPGEL’s customer base includes large entities in the infrastructure and renewable energy sectors, the company also serves a diverse range of clients. The ability of buyers to exert significant pressure on prices might be limited due to the specialized nature of KPGEL’s products and its focus on providing end-to-end solutions. |
| Threat of Substitute Products or Services | LOW |
| While alternative materials or solutions might exist for some of KPGEL’s products, the company’s focus on specialized steel products for infrastructure and renewable energy applications, along with its emphasis on quality and end-to-end solutions, reduces the risk of direct substitution. |
| Rivalry Among Existing Competitors | HIGH |
| The steel fabrication and galvanization industry is characterized by numerous players, both domestic and international. Competition is based on factors such as pricing, customer relationships, product quality, customization, and innovation. KPGEL’s competitive strengths lie in its experienced leadership, execution capabilities, and focus on quality. However, the presence of larger competitors with greater resources and established reputations intensifies the competitive landscape. |
Peer Comparison
Comparison of KP Green Engineering Limited’s (KPGEL) key performance indicators (KPIs) with those of two listed peer companies: Salasar Techno Engineering Limited and Skipper Limited.
| Particulars (₹ in Crores), (FY 2024) | KP Green Engineering Limited – | Salasar Techno Engineering Ltd | Skipper Ltd |
| Revenue from Operations | 349 | 1,208 | 3,282 |
| Operating Profit Margin (%) | 15 | 10 | 10 |
| RoE (%) | 109 | 12.4 | 9.02 |
| RoCE (%) | 104 | 15.7 | 20.3 |
| Operating Cash Flows | -42 | 52 | 199 |
Green Box
IPO Funds:
Funding Capital Expenditure for Expansion:
The company aims to utilize a significant portion of the net proceeds from the IPO to part-finance the capital expenditure required for setting up a new manufacturing unit in Matar, Bharuch, Gujarat at an estimated cost of ~ Rs.175 Crores.
The new facility is projected to have a capacity of 294,000 MT per annum, which represents a substantial increase from the current capacity of 53,000 MT at their existing plant in Dabhasa, Vadodara.
Product Portfolio Diversification:
The company plans to introduce new product lines at the new facility, including High Masts, Floor Gratings, Pre-Engineered Buildings, and Heavy Fabrications. This diversification will help the company expand its market reach and reduce its dependence on existing products.
Government Initiatives:
The government’s focus on infrastructure development, evident in initiatives like the National Infrastructure Pipeline and the PM GatiShakti Master Plan, is expected to drive significant steel demand.
Production Growth:
India’s steel production is projected to increase by 4-7% in FY24.
In-house Fabrication and Galvanization:
KPGEL emphasizes its ability to provide both fabrication and hot-dip galvanization services in-house. This integrated approach could offer advantages in terms of quality control, cost efficiency, and faster project turnaround times compared to competitors who might outsource one or both of these processes.
Tailor-Made Solutions:
KPGEL highlights its ability to provide tailor-made solutions to clients, suggesting a focus on customization and flexibility that might distinguish it from competitors offering more standardized products.
Amber Box
Capacity Utilization:
Underutilization of Capacity:
The company’s manufacturing capacity utilization for the period ending September 30, 2023, was only 39% as the capacity has nearly doubled from FY2023 to FY 2024, but with large capacity expansion planned for the coming years, the company has to catch up on the capacity utilization to maintain profit margins.
Successful Execution of Expansion Plans:
The timely and cost-effective implementation of the new manufacturing unit and the successful launch of new product lines are crucial for achieving the projected growth.
Debt:
The company’s debt structure, as of September 30, 2023, consists of both long-term and short-term borrowings from various banks and financial institutions. The total debt outstanding is ₹4,895.34 lakhs with a Debt-to-Equity Ratio: of 1.11.
Customer and Supplier Concentration:
The company’s revenue is heavily reliant on a small number of customers, with the top ten customers contributing 71.10% of total revenue for the period ending September 30, 2023. Similarly, the company depends on a few key suppliers for its raw materials with the top ten suppliers contributing 77.75% of total purchases.
Red Box
Negative Operating Cash Flow: The company reported negative cash flow from operating activities in the recent financial year. While this may be temporary, sustained negative operating cash flow could indicate underlying issues with the company’s core business operations and its ability to generate cash from its primary activities.
Images
- For Porter’s Five Forces, the force value of “LOW” is considered good. ↩︎
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