Polycab India hosted a conference call on May 10, 2024. In the conference call the company was represented by Inder T. Jaisinghani, CMD and Gandharv Tongia, ED.   

Key takeaways of the call

Strong volume growth in domestic business, supported by government & private capex and uptick in real estate, as well as strategic internal initiatives helped the Company gain significant market share in domestic C&W business during the year.

Domestic C&W business registered a volume growth of 30-40% both for Q4FY24 and FY24.  Volume growth of cables (growing at higher thirties) is faster than wires (growing at lower thirties).

Polycab gained significant market share or organised C&W business to 25-26% from 22-24% market share in FY23

Revenue from international C&W business on YoY basis has de-grown for Q4FY24. But on sequential basis it has bounced back   with a 60% sequential growth, after registering a decline in the previous quarter.  The revenue degrowth in Q4FY24 on YoY basis was due to transition in business model (moving to distribution model) undertaken in its largest market i.e. USA. The transition is expected to take another 3-5 quarters to stabilize. Meanwhile the sales from other geographies including new additions are to partially compensate. The Company expanded its global footprint to 79 countries.  Contribution from the international business to the consolidated revenue stood at 7.7% and 8.0% for the quarter and the year respectively.  Target international business to contribute 10% of top line by FY26.

FMEG business exhibited a growth of 17% YoY in Q4FY24, on account of a lower base amid a seasonally strong demand for fans, which registered an impressive growth. One-time impact from impairment of investment in joint-venture Techno Electromech (amounting Rs 10.5 crore) and provisioning on aged inventory (about Rs 10.5 crore), coupled with the lack of economies of scale resulted in accelerated decline in the bottom-line of FMEG business.

Progress on improving execution of the strategic roadmap for FMEG business is proceeding smoothly.  Expect this process to complete by end of current fiscal and post which the FMEG business is expected to register a growth higher than the industry.   

The quarter was reasonably good for the new range of BLDC and premium fans, which have received good response from the market.

The Switches & Switchgears segments continued their strong growth momentum during the quarter. Nep product development bears fruits. The new Atler range and new MCBs range introduced in early 2024 contributed significantly to the revenue.   Aim to increase the new product range and mcbs to scale. 

Fans & Lights together contributed about 50% of the FMEG business and Switches is the second largest category in FMEG with contribution in high teens. The target of the company is to be among top 5 player in fans.  

Lights & luminaries registered sequential growth even though the industry saw 7-8% correction in prices.  Expect further price correction going forward. The company looks to increase mix of premium products to improve profitability. 

Project won through RDSS scheme drive the growth of EPC business and the orders are to be executed over next 3 years.

The company is very selective in picking order in EPC business. Currently has an order book of Rs 48 billion to be executed over next 3 years.  Annual sustainable operating margin in this business is expected to be in high single digit over mid-to-long term. The company though delivered better than high single digit margin it sticks to high single digit margin in the medium to long-term.

Project LEAP is progressing well towards achieving FY26 goals including revenue of Rs 200 bln.  Midterm guidance will be given latter during this fiscal.

Capacity utilization for C&W in Q4FY24 was around 75%.  

In FY24 the company incurred a capex of Rs 8.6 billion (up 87% from Rs 4.6 bln in FY23). Further over the next 2-3 years the company will be investing Rs 10-11 bln every year for capacity enhancement. About 20% of the capex is expected to go to Greenfield Halol plant (for EHV cables). The Halol plant is expected to complete by end of FY26 and start contributing to top-line from FY27.

C&W - Good demand is coming for next 10 years and the capacity coming is not good enough to meet the strong demand.

In C&W the company looks to consistently deliver an EBIT margin of 12-13% and depending upon product mix it may go up a further.