Key takeaways of the call

First quarter performance has been encouraging. Despite challenges posed by lockdowns in many states, the company is able to record much better business compared to last year. The company remain diligent in managing costs and navigating the volatile demand environment.

Wires and cables business doubled on YoY basis to Rs. 1586.2 crore in Q1FY22 from Rs. 793.5 crore in Q1FY21. However the profitability (EBIT at 6.6% in Q2FY22 against 13.4% in Q4FY21 and 3.1% in Q1FY21) was impacted by raw material inflation and adverse operating leverage.

In Domestic business, Cables outperformed Wires in Q1FY22 partly on account of relatively favourable base.

Distribution as well as Institutional business was more than 2 times of last year.

W&C exports contribution to overall revenue stood at 6% in Q1FY22 compared to 4.5% in Q4FY21. The growth was driven by Asia, Australia, UK and Africa. Logistical challenges continued.

Infrastructure and construction activities picked up in full swing along with improvement in consumer sentiments.

FMEG business grew 39% YoY in Q1FY21 despite closure of retail shops across many large states in peak summer season.

Fans grew in healthy double digits however lockdowns in April and May, which are key summer stocking periods, hurt the momentum. Premiumization trend continued in Fans.

Switchgears saw strong growth however switches remained subdued. Solar and Conduit pipes saw healthy traction.Lights business grew with higher emphasis on augmenting portfolio across price points.

Confident H2FY2022 will be much better than H1FY2022 as lockdown impositions are easing and volatility in input costs is on the decline. Expects operating margins to return to 11-13% due to improving demand scenario and various cost-effective measures undertaken by it.

FMEG - Distribution expansion continued with greater thrust on digital marketing campaigns. Innovation driven product development remains a key focus area.

The company focuses on increasing distributors and dealers, electricians, and influencers as they target their products to reach smaller towns of the country.

Price hike taken by the company is 9-10% as against the raw material price increase of 11-12%.

The company has given double increment this year as it did not offer any increment to its employees last year. This has led to increase in fixed cost. Moreover, during the quarter, there has been an increase in AMC cost, which is attributed to the B2C business.

Annual sustainable operating margin of others segment (EPC business) is expected to be in high single digit over mid to long term.

Capex for FY2022 is estimated at Rs. 300 crore, of which 35% would be towards the FMEG segment and balance in cables and wires facilities for import substitute products. The company has spent Rs. 80 crore in Q1FY2022.

The company in Jun 2021 acquired 100% stake in Bengaluru-based automation company, Silvan Innovation Labs, for Rs. 18.2 crore. It's acquisition of Silvan adds new dimensions to its research and development (R&D) and innovation capabilities and the company's vast distribution presence and strong manufacturing capabilities will be leveraged to scale up Silvan's highly functional Internet of Things (IoT)-based solutions.

The company is progressing well on its strategic agenda which will drive transformation over mid to long term