Kamdhenu Ispat, one of the largest sellers of branded TMT bars, is engaged in manufacturing, marketing, branding and distribution of a vast range of quality building materials including structural steel, colour coated metal sheets, decorative paints and allied products.

The company is viewed as a TMT expert and two of their unique TMT products are Kamdhenu NXT and Kamdhenu SS 10000.

Kamdhenu is known as price setter in the steel TMT bar retail segment in different parts of the country.

Earlier, Kamdhenu was in to manufacturing, but later launched a unique franchise business model in 2004, which helped the company to create a brand leadership in the retail steel segment.

Under this model, Kamdhenu provides technology support, ensure quality steadiness, provide exclusive retail marketing network of over 6,500 dealers and distributors, branding support and collects royalty on a per tonne basis from the franchise associates.

If we take the example of FY18, total sales under the Kamdhenu brand sales was Rs 8,072 crore, but for the listed company, the total revenues is Rs 1,180 crore in its books.

The trading business is the least lucrative business for Kamdhenu, while there is hardly any growth in the manufacturing business.

However, the paints business has been showing life and on earnings before interest and taxes (EBIT) basis, Kamdhenu has been doing a three percent margin in FY18 and operating leverage is expected to kick in the coming years.

But, the most important income of Kamdhenu is the royalty collection from manufacturing franchises spread across the country.

In the past few years, if we assume selling was approximately 40,000 per tonne under the Kamdhenu brand, the royalty paid to Kamdhenu would be below one percent, which is 360 per tonne.

In fact, the number of franchise units Kamdhenu are overseeing has gone up in the recent past and in turn the royalty income as well.

How Does The Franchisees Gain?

Franchisees get their plants to operate at higher capacity utilisation levels, access to a ready marketplace and strong marketing network.

In short, the franchisees enjoy entrepreneurship, while Kamdhenu enjoys lending its marketing strength.

The company has ambitious plans for 2020 that is stated below.

The promoters hold approximately 66.7 percent stake in Kamdhenu and noted investor Mukul Agarwal and family holds four percent in the company.

While the total debt in their books is approximately Rs 100 crore, but that is almost entirely working capital.

First Published:Jul 30, 2018 3:44 PM IST