Shri Kanha Stainless Ltd., represented by Whole-Time Director Shashank Agarwal, outlines its journey as a stainless steel manufacturer with over three decades of industry experience. The company discusses its operations, market dynamics, and planned capacity expansion, with a focus on steady growth over the coming years.
Karunya Rao: Hello and welcome to Small Cap Spotlight. I’m Karunya and today we’re joined by the management of Shree Kanha Stainless Limited. Mr. Shashank Agarwal, he’s a whole-time director with the company.
He’s joining us to talk us through what’s happening at the company level, the performance and the way forward. Thank you so much Mr. Agarwal for joining us today and welcome to Small Cap Spotlight.
Shashank Agarwal: Thank you Karunya.
Karunya Rao: So first things first, help us understand about Shree Kanha Stainless Limited. What exactly is it that you do within the metal space? Any milestones or any you know highlights that you would like to share with us about the company, what it does and how it has shaped up over time?
Shashank Agarwal: Karunya Shree Kanha Stainless actually was formed in 2015. So this company is like we are into manufacturing of stainless steel coils, stainless steel strips, stainless steel circles.
So like we have been, we are operating a 20 high mill in this which is a very precision mill which is like only two or three people in India are having right now. So like in this we are manufacturing materials for great steels like in rail for railway coaches or like for optical fibre people or you can say gaskets people. So we in totally if you say in steel we have an experience of 35 years or more like my father and his like my grandfather have been always into steel business.
So we have a total experience of 35 or more years in stainless steel right now. So stainless steel was like Kanha Stainless was made as an backward integration for our whole family business what we had and currently we are manufacturing various grades in this like 200 series, 300 series and 400 series which have their own applications and like it is being used in your daily lifestyle like you can say utensils, your shaving blades, dairy products, sinks, elevators, railway coaches etc.
Karunya Rao: So you’re present everywhere every aspect of day-to-day life.
Yes like we have to supply like these are some application in which stainless steel is used and we have been present not directly but through our B2B channel we are supplying our material all over the India.
Karunya Rao: Okay fair point. Now you were talking about being in this space for three generations now and a backward integration of sorts that you have done.
So can you talk us through what is this core business that was there maybe three four decades back how it has evolved into today’s Shree Kanha Stainless that it is?
Shashank Agarwal: Our group company Now Biotubes Limited was set up in 1990 by my father and my grandfather. They were into manufacturing of mild steel pipes, galvanising pipes. So when I took over in 2012 approximately like I was only 23 that time.
So we had a vision to why not to go into something which is going to be in our whole daily lives and which is going to grow more into our journey or you can say in our daily habits because stainless steel you can say is like in generally like mild steel has a problem of rusting plastic has its own problem like we cannot use plastic use like it is very hazardous to use plastics and aluminium utensils are very like hazardous to use. So stainless steel wasn’t solution to all this. Stainless steel is very light in weight plus has better usability and feasibility to use.
So why not to use a product which has a lifespan of just some double of these things. So we ventured into stainless steel and got ourself into stainless steel and have been doing really well from past like since we started we almost have tripled or four times our revenue since we started this company.
Karunya Rao: So since inception have you been involved how long have you been with the company? I started in 2012.
Shashank Agarwal: I said like I said I was 23 when I started this business. So like I did my marketing in like MBN marketing. So slowly slowly I’m looking after all the sales purchase and everything into this business.
Karunya Rao: So since so clearly you’ve seen the company since inception the Sri Karna which was founded in 2015. So according to you when the company started out what were the most challenging aspects? Was it operational challenges, financial, market related and more importantly how did you address or solve or tackle those challenges?
Shashank Agarwal: Whenever you are entering into a new space you always have a problem. Like in starting we had the biggest issue was the material was coming from China.
They were selling at a very low price. They were selling a low quality goods what they were selling but with the help of the government the like quality control has come up. BIS has come up plus anti-dumping duties has come on China and various other countries which has helped us to have our own space and our own market in current all over the India.
Like currently before if you see one more problem what we had the steel was being selling in majorly tier 1 cities. Now you we are ready to sell like in all like tier 1 cities, tier 2 cities, tier 3 cities we are selling all over. Like there is not a place where we are not selling our product.
So and demand was initially a problem because people were using aluminium and plastic but if you see from after Covid people are starting using stainless steel more and have been even your fridge bottles have been changed from plastics to your stainless steel. So stainless steel has been your you can say increasing every day in your lifestyle. Right.
Karunya Rao: You know you talked about how the market has evolved over the years but right now if we look at the stainless steel industry in India how do you see it and what are the key demand drivers and also the challenges at the same time right now the way things are in the industry.
Shashank Agarwal: Market driven forces right now is you can see the government is helping us learn the infrastructure majorly. Like your if you can see your railway coaches are all being made in stainless steel right now.
Plus now your buses what they were being made now they have been made in stainless steel right now. Even your bus stops or any infrastructure like anywhere your houses in your houses your daily your furniture your house railings are being made from stainless steel. So this has been you can say the growth parameters what you can say in double digits the stainless steel has grown past many years right now.
And the problem still is you can say the people are not ready to pay more but slowly their mindset has been into if you’re getting a product which is which has its life like two to three times what they are using. So why not we pay more and buy this product. So things have been improving in India and hopefully it will improve more.
Karunya Rao: So if pricing is a challenge and if people are still unwilling to spend beyond the point how do you tackle volatility especially metal prices while you said demand has gone up post covid even the raw material prices have gone through the roof in the same period. So how are you tackling the raw material challenge the price volatility there and maintaining your profitability and margin.
Shashank Agarwal: See there are two to three things which have been always our margins which have been like we are manufacturing material into very lower thickness.
So in India only one or two people I think are manufacturing that type of thickness like we are manufacturing 0.08 mm. Which is the lowest thickness which is in the manufacture right now which has been used in blade steel right now. And plus our backbone of the companies are you can say our B2B distributors.
So they are always helping us like to they always have that demand which they don’t let us down and that demand is always there with us. Like you can say we have in a good order book of always like 10 to 15 crores in our hand plus we keep in a good stock with us. So the price for fusion does not matter to us that much.
And plus the thickness what we are making gives them boost in our margins what we have been doing.
Karunya Rao: Okay. Currently how are the margins in what range are you clocking in?
Shashank Agarwal: Currently we are doing between 4 to 5 percent like we are doing right now.
Karunya Rao: Okay and is there a plan or a strategy to scale that up?
Shashank Agarwal: Yes like we will we might be coming with a solar on our rooftop. So it will help in decreasing our electrical thing. Plus we are coming with an capex right now which will start in June or July.
So which will help us in like you can say 1.5x times of our capacity by maybe by third or fourth quarter. So it will help us in increasing our margins plus our revenue growth.
Karunya Rao: So how much is the capex and how much of a growth in your top line are you expecting post that post the capex is done?
Shashank Agarwal: Capex we are doing approximately around 12cr right now.
Karunya Rao: So to what extent will it help you boost your revenue?
Shashank Agarwal: It will help us push in around like 1.5x times. And maybe more in the coming years.
So like it will be a new line so new machine so it will take time to set up. So might be in a year or so we will be having a good growth. Okay.
Karunya Rao: You know this is a very competitive space very price sensitive like you already mentioned. So where do you think does Sri Kanha Stainless have an edge in the industry? What gives you your edge or that USP as we call it?
Shashank Agarwal: My edge is like we are sitting in the centre. So the major markets like Delhi, Bombay, Jodhpur, Ahmedabad, we are in the centre.
So the transportation is very easy for us. So the transportation cost is very less for us compared to the people who are manufacturing in Bombay and selling to Delhi. So this is an edge to us plus the like I told you the thickness what we are manufacturing is on very minimum side which all the people don’t have.
So that will be that is a boost for us like manufacturing such low thickness which help us a good margin all the time throughout the year.
Karunya Rao: Okay. Got it.
What about demand visibility? What do you what kind of volumes or again visibility that you have in terms of demand and if you could give us some outlook on the order inflow in the medium term perhaps?
Shashank Agarwal: Like as I told you the backbone of a company has always been our distributors. They always keep us having an order book of 10 to 15 CR always in our hand. So we don’t have a problem of whether the prices are high or they are low.
We always have a good order book and plus you can say we always promote them to go into new product line or new space where they can sell their product. So the demand is never a problem for us. Okay.
Karunya Rao: That’s good to know. Going forward you’ve already addressed the challenges that the company saw in its initial years. Now right now as things are what is the biggest risk or a challenge that you think is for the company? Is it raw material, margins, working capital, balance sheet discipline? What do you think is the biggest concern right now?
Shashank Agarwal: So you can say the biggest concern is right now the working capital has never been a problem for us.
So the and plus the margins will be improving as I told you with our CapEx. The margins will obviously increase. It won’t decrease because we will be having a better revenue in future plus better growth.
So maybe some issues like the labour or raw material you can say supply may be a little issue but we always is we know our experience and we know that what is going to happen post like six months or a year what is going to happen. So we are ready for that.
Karunya Rao: Okay. That’s good to know. You talked about labour which brings me to the question about your team and the management of the company. Can you tell us who are the top four or five leaders? Who is helming the company? If you can tell us a bit about the team leads.
Shashank Agarwal: See the main promoters are itself in the family. My father has been into steel business from past 40-45 years. He has been dealing with steel and my wife is the CFO of the company.
She is like very good in the network and I have as I told you me myself have an experience of like 15 years right now. So we all like as a family is the strength and this makes us go ahead and have a confidence in ourselves to keep growing. Great.
Karunya Rao: If one were to ask you as an investor what is the vision you have for the company for the next five seven years? What is the you know scale or market positioning that you’re targeting? Anything that you can highlight for us your investors and the viewers? S
Shashank Agarwal: Some things which will be adding in our portfolio will be like in future will be moving towards B2C market as well because India is growing at a very like tremendous speed. So there are many products like as I told you hose pipes are there, springs are there or you can say cable ties are there, optical fibre is growing very high in India. The internet what we’re using is through optical fibres.
So in the you can say the late heat exchangers, the dairy tanks, chemical tanks we are looking to enter aggressively into that market right now. Plus you can say we are looking to enter into more grades like I told you like 200 300 400 series we are looking to make more grades so that we will have a larger volume and we can have more SKUs in our kitty and plus we are looking to like explore the export market as well like you can see the with the help of EU trade we’ll be having we can enter into Europe market as well and plus we are looking to enter the Latin America market soon. So we’ll be wide B will be growing 2 to 3x times in like five years time.
Karunya Rao: So a 2 to 3x growth is what you’re eyeing in top line is it?
Shashank Agarwal: Yes.
Karunya Rao: Okay great and we we look forward to that. Thank you so much Mr. Agarwal once again for talking to us on SmallCap Spotlight.