KEI Q2: Sales Up 39%, Margin and Cash Down
KEI Industries sold 38.5% more in the September quarter than a year ago, and 18.6% more than in June. But the company kept less of each rupee: its contribution margin fell to 21.8% from 24.8% in June, and EBITDA was lower than in June despite the higher sales. Meanwhile inventory rose to ₹3,604 crore from ₹2,401 crore in March, and cash fell to ₹698 crore from ₹1,513 crore.
The quarter
| Standalone, ₹ crore | Q2 FY26 | Q1 FY27 | Q2 FY27 |
|---|---|---|---|
| Revenue from operations | 2,727 | 3,185 | 3,777 |
| Cost of goods sold, % of revenue | 76.67% | 75.23% | 78.19% |
| Contribution margin | 23.33% | 24.77% | 21.81% |
| EBITDA | 312 | 415 | 401 |
| EBITDA margin | 11.43% | 13.04% | 10.62% |
| Profit after tax | 204 | 274 | 262 |
Source: [P]. EBITDA fell ₹14 crore from June while revenue rose ₹592 crore (our arithmetic).
The presentation says EBITDA grew 28.69% on last year "due to better operating efficiency and better product mix" ([P]). That is true against September 2025. Against June, the cost of goods sold took about three more points of revenue (our arithmetic), and the presentation doesn't explain why.
Where the growth came from
- Domestic wires and cables grew 45.76% on last year, "led by sustained demand and operational improvements" ([P]).
- Dealers and distributors: sales through them grew 50.46% and made up 58.79% of the total, against 54.12% a year ago. KEI had 2,146 active dealers at the end of September ([P]).
- EHV cables (extra-high-voltage, for power transmission) rose to ₹217 crore from ₹172 crore ([P]).
- Exports grew only 7.27%. The company says the business "is expected to grow substantially due to strong order book position" ([P]).
- Pending orders: about ₹5,185 crore ([P]).
Where the cash went
| ₹ crore | 31 Mar 2026 | 30 Sep 2026 |
|---|---|---|
| Inventories | 2,401 | 3,604 |
| Trade receivables | 1,842 | 1,677 |
| Cash and bank balances | 1,513 | 698 |
| Short-term borrowings | 186 | 285 |
Source: [P]. Inventory rose by ₹1,204 crore, or 50%, in six months (our arithmetic). The cash figure includes ₹168.91 crore of unused QIP money ([P]). Counting acceptances (supplier credit backed by banks) of ₹727 crore, the presentation shows total debt net of cash of ₹314 crore at the end of September, against net cash of ₹592 crore in March ([P]).
KEI is also still building capacity: fixed assets rose to ₹3,044 crore from ₹2,689 crore in the same six months ([P]).
One note in the results
The results repeat that "The Income-Tax authorities had conducted search activity during the month of May 2026" at some premises, plants and employees' homes. The company has received no written communication on the outcome, so the impact "is not ascertainable"; management believes there is no material adverse impact ([R]).
Moat and margin
Focus moat: distribution reach. The filings support it: dealer sales grew faster than the company and now make up almost three-fifths of cable sales. EHV cable sales, the high end of the range, grew 26.20% ([P]).
Margin: down from June, and below last year. The contribution margin is 1.5 points below a year ago and 3.0 points below June (our arithmetic). The half-year margin is still slightly ahead of last year (11.73% against 11.46%) because June was strong ([P]).
MoatSCORE (Moat Screener, first pass): KEI Industries 5.91, AMBER ([MS]).
The bear case
- Growth is costing margin. The cost of goods sold took 78.2% of revenue, the highest of the three quarters shown.
- Working capital is absorbing cash. Inventory up 50% in six months; cash more than halved.
- The explanation is missing. The presentation credits mix and efficiency for the year-on-year gain but says nothing about the quarter-on-quarter fall.
- An open tax matter. The May 2026 search has no outcome yet.
The case for
- Demand is broad: domestic cables up 46%, dealer sales up 50%.
- The order book is ₹5,185 crore, and EHV cable sales grew 26%.
- The balance sheet is light on debt: short-term borrowings of ₹285 crore against equity of ₹7,203 crore ([P]).
What to watch
- Whether the contribution margin returns towards 24% once inventory is sold.
- Inventory and cash at December: does the build reverse?
- Export growth, which the company expects to pick up.
- Any written outcome of the income-tax search.
Sources
- [P] KEI Industries, Q2 FY27 earnings presentation (NSE)
- [R] KEI Industries, outcome of board meeting and unaudited results (NSE)
- [MS] Moat & Margin, Moat Screener and How MoatSCORE works
Educational research, not investment advice. Every figure above is drawn from KEI Industries' own filings, read from the primary documents on 22 October 2026; derived figures are our arithmetic, labelled as such. MoatSCORE read live from the Moat Screener on 22 October 2026. No buy/sell recommendations, no price targets, no share prices. Moat & Margin is not a SEBI-registered Research Analyst or Investment Adviser.
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