Polycab hosted a conference call on Oct 19, 2023. In the conference call the company was represented by Inder T. Jaisinghani, CMD and Gandharv Tongia, ED.   

Key takeaways of the conference call

Strong topline growth was driven by strong volume growth in wires & cables business especially domestic.

Strong volume growth drove the revenue of Wires & Cables revenue in Q2FY24. Overall domestic volume growth was 30% in W&C.   W&C witnessed continued strong demand supported by government capex and robust real-estate off-take enabled sustenance of growth momentum.  Domestically, both distribution driven business and institutional business exhibited strong performance.

Cables growth continued to outperform wires growth. Polycab special purpose cables reported strong growth in H1FY24. 

Revenue from international business contributed 9.3% of the consolidated W&C revenue for the quarter. The Company expanded its global footprint to 76 countries

Brand Etira, optima and green wire which together accounted by 30% of sales.

FMEG business exhibited marginal growth of 8% YoY in Q2FY24, in-spite of the larger businesses of Fans and Lights showing de-growth due to continued weakness in consumer demand.

Some of the products in FMEG are seasonal demand and some equal throughout the year. Fans are seasonal. The lights demand is expected to be good during festive season and the company is well prepared to capture it.

Switchgears and Conduit Pipes & Fittings showed remarkable growth during the quarter, both on YoY and QoQ basis.

Switches business too exhibited excellent growth, with sales growing ~2x YoY, on a strong base. Luminaires business had a strong quarter, benefitting from the set-up of its separate GTM vertical, under Project LEAP

Geographically the W&C growth was broad based, with highest growth coming from North region. Geographically, both West and South regions showed yearly as well as sequential growth in FMEG business during Q2FY24, while the North region showed sequential growth.

Improvement in mix towards higher margin products contained bottom-line de-growth for FMEG despite higher A&P spends during the quarter.

W&C Margins improved by about 300 bps YoY in Q2FY24 led by better operating leverage and improvement in product-mix

Three new fans models launched of which one in BLDC segment.

Market dynamics is in favour and the demand is good for the products of the company.

With in cables the demand is coming from across the segments and industries i.e. T&D, real estate, railways, metros  government segment. 

Sustainable EBITDA margin irrespective of commodity price movement is in the range of 11-13%.

In Q2FY24 Copper price was up 8% but aluminum prices was lower.

Cables and wires registered a revenue growth of about 30%yoy and 20%yoy.

Distribution realignment is completed in case of FMEG.

Government increasing capex in infra in the last 3 years. This is structural demand driver for the W&C industry.  Private capex is also picking up adding further demand for cables.

Backward integration in W&C is 100%.

Capacity utilization of W&C is currently around 65-70% and it could go up to 95%.

The company plans to incur capex of 600-700 crores each year for next two years. Investment in capacity for EHV and Special purpose cables.

Lighting division – led new technology has come in. which has led to pricing correction almost by 20-22%.  That pricing correction is done with and now the situation is improving. 

Fans and lights are largest contributor for FMEG and now the company is increasing the switch and switchgear.  Now FMEG  is entirely in-house manufacturing   and once there is scale up of volume there will be better cost absorption leading to margin improvement along with premiumisation.

Excluding A&P spend there is improvement in EBIT of FMEG and it will be in profit.

Expect to achieve its FY26 revenue target of Rs 20000 crore ahead of time and plans to announce new target within next few quarters.