MANAGEMENT MEET WITH
#KERNEX MICROSYSTEMS (INDIA) LTD.
We discussed the following topics with the CEO/COO Sh. E.B. Rao ji of
#Kernex :
1. What will be the impact from the entry of 2 new players ,i.e,
#GG Tronics &
#Siemens?
A: There are 2 phases that any new vendor has to pass through before participating in the tenders:
(a) Successful completion of trials of
#Kavach ( including Inter-compatibility has to assured) : It takes almost a year’s time
(b) ISA (Independent Safety Assessment ) Certification : It takes another 1 to 1.5 years time
So for the next 2 years there are very low chances that any of these 2 players can enter the market directly and participate in the tenders.
They might do the implementation but the
#TCAS will have to be purchased from any of the existing 3 registered vendors only till the trials and certification work is not completed.
2. Is the execution of
#Kavach on track as per communicated in AGM. i.e. 315-325 cr for FY 23-24. and 1200 cr for FY 24-25?
A. Yes the execution is on track as guided by the management in the AGM.
3. Possibility of increasing the per km cost due to entry of new players (how will the gap of 50L and 2 cr will be justified/bridged?)
The cost of Rs.50L per km for implementation of Kavach is only an estimate and it varies on different railway routes. It can increase or decrease as per the complexity of the track and other factors.
4. What will be the share of
#Kernex and
#KEC in the JV for Project 1 and Project 2?
A: Kernex share will be 2/3rd and
#KEC International share will be 1/3rd. The entire invoice proceeds will come in Kernex bank account and the share of KEC will be paid by Kernex and will be shown as an expense in the Statement of P&L.
#KEC International will be doing the Civil work (construction of Control rooms) and cable laying for the implementation of Kavach.
5. When will the new CEO be appointed in the company for better execution of orders?
A: CEO/COO has already been appointed. His name is Sh. E.B Rao ji. He is taking care of the entire operations.
6. What is the status of the Oct-Dec 2023 Tender as per the 31st AGM?
A: The tender will get delayed due to upgradation requirement of TCAS. RDSO requirement is of Kavach 4.0 whereas all the existing 3 players have developed Kavach 3.20 and are in the process of upgrading the same.
7. How much time will it take to upgrade the Kavach from 3.20 to 4.0?
A: As per the management the development and upgradation will be done latest by 31st December, 2023 but getting ISA certified will take another 3-4 months after the development is completed.
8. Is there a possibility that a penalty may be levied on Kernex for delay in execution of orders or the Railways may choose not to offer next tender therein?
A: As of now Kernex is on track and the order execution is getting delayed due to some requirements of RDSO. So there are zero chances of any penalty on Kernex. Also Kernex is completely ready to grab the next tendor and everything is under control as guided by the management.
9. What is the progress on NCR order of Vande Bharat?
A: The execution will be completed by the end of the month December, 2023 and invoicing will be done in January and the payment will be received within 30 days of generating the invoice.
10. Is there any new segments or verticals that the company is exploring apart from TCAS/Kavach?
A: Yes, the company is venturing into Moving blocks (a communication based system) for railway lines.
They are also entering into Smart Yard Management system to avoid accidents in operations of industries.
These will open up new revenue streams for the company.
11. What is the position of working capital at the moment? Does it affect the implementation of order on hand, at this time?
A: The current funds raised through preferential will be sufficient for current year targets and execution of 550 cr orders in hand. For achieving the targets of next year the company is already in contact with few fund houses for raising close to 600 crore (collateral free loan).
12. Is the working capital likely to improve with milestone payments? When such payments are likely and to what extent?
A: Yes. As soon as the Kavach implementation gets completed, the invoice is raised and the payment is received within 30 days. By December end few projects are on the verge of getting completed and the payments from the same will start coming in a month’s time and that will likely improve the working capital problem of the company.
Kindly note: Strictly not an investment advice. Do your own study before taking any decision.