Key takeaways of the call

Business was significantly impacted in second half of Mar¡¯20 given it is generally a prime sales period for wires and cables business. Until then, Q4FY20 was panning out broadly in line with company expectations.

Revenue in FY20 declined by 14%YoY and 15%q-o-q severely impacted by COVID-19 outbreak and subsequent lockdown during prime sales period. Excluding COVID-19 impact, sales could have been higher by approximately Rs 6.1bn implying a potential 11% YoY growth in Q4FY20

Wires & Cables (W&C) Segment

COVID -19 pandemic and nationwide lockdown severely dented demand during prime sales period. Q4FY20 severely impacted due to virus outbreak posted 11%yoy fall in sales. W&C saw muted demand in Q4FY20 due to lower realisations and closure of retail channel owing to lockdown. However the Q4FY20 profitability improved on the back of higher contribution.

FY20 domestic sales were impacted challenging economic environment and benign commodity prices over and above the impact of Covid lockdown in peak demand period.

Domestic distribution channel sales posted a slight decline in FY20 while institution business was stable helped by OFC, which clocked sales of over Rs 1.8 billion.

For Exports it was a year of strong growth. Its contribution to overall consolidated sales grew to 12.3% in FY20 vs 3.1% in FY19 led by partial execution of a large export order and increasing traction seen in few developed geographies. Dangote sales amounted to about Rs 7. 5 billion in FY20.

The company in medium term, expects the contribution of exports to be 10%. In export market, it is identifying various geographies to boost export sales.   Dangote pending order book©\Rs3.5bn.  

W&C market has de©\grown 14% yoy in FY20, with organized segment de©\grew in single digit, while un©\organized segment has contracted in high double digits.

Wires business saw muted demand in Q4 due to lower realisations and closure of retail channel led by virus outbreak . As a result, FY20 sales ended flattish vs FY19 .

Historically steady state EBITDA margin in Wires & Cables business, on an annualised basis, has ranged between 11-13%

FMEG Segment

FMEG income in FY20 grew 30% YoY driven by portfolio augmentation, better product mix and overall distribution expansion. FMEG contribution to overall sales increased 140bp YoY to 9.4 % in FY20. Improved sales mix and pricing actions led to better profitability in FY20.

COVID -19 outbreak significantly tapered overall growth in FY20. In 4QFY20, sales declined by 6%YoY hurt by pandemic outbreak and operational deleverage impacted profitability.

Fans continued to see great traction across portfolio. Improved sales mix and pricing actions led to better profitability for Fans.

In Fans, the company is foraying into adjacent categories and premium price points to reach more counters and fulfil different product needs of customers.

Lighting continued to grow at a reasonable pace on the back of evolving product mix despite challenging market conditions. Strong growth in volume was counterbalanced by price erosion.

EBIT margin improved 86bps yoy in FY20 led by better mix and pricing actions but was partly offset by adverse operating leverage. However, EBITM contracted 67bps yoy in Q4 due to lockdown impacting operations.  

EPC /Others Segment

Execution of profitable project led profitability growth in FY20. Company is executing Bharatnet phase 2 in Bihar and Gujarat. Connected 4,700 Gram Panchayat with OFC in 10 months.

EPC growth in Q4 was impacted due to delayed execution on account of restriction in movement.

Operating margin in this segment is expected to be in high single digit over mid to long term. Revenue contribution to remain in the range of 4©\5%.

Other developments

Polycab is the first company in industry to implement automation in its warehouse in Halol.

A&P was partly curtailed in Q4 due to pandemic.

125000+ retail outlets. 3,500+ Dealers & Distributors

Ryker¡¯s 50% stake was bought for Rs 30 crore. Capacity of copper rods plant is 225,000tons.  

Program for reducing inventory and increasing SKU¡¯s is progressing well and the benefits of which, will be fully reflected in FY21.

Channel financing in W&C ¨C 60©\65% and FMEG ¨C 15©\20%.

Capex in FY21 is planned at Rs 200 crore but that is depending on the market activity.

Outlook

Q1FY21 is likely to be significantly impacted as the sales in first 40 days were insignificant. Post this some demand action was witnessed in tier 2, 3 and rural areas.

Many infrastructure and construction projects across the nation where the company supplies, have started or resuming their operations or planning to do.

Currently majority of company¡¯s authorised dealers and distributors, and retail channel is operational. However larger dealers in metros are struggling due to restriction of movement.

While the assessment of the future impact on demand is still premature and depends on several external factors, current trends and best estimates suggest it will take at least a quarter or two for demand to normalize. Therefore, FY21 could be weaker than FY20 in terms of sales and profitability.

Currently, all factories have resumed operation with limited manpower and capacity. Production will be ramped up depending on ground environment, demand and liquidation of inventory. Warehouses, regional and local offices in non-containment zone are open. Corporate office continues to work from home.

Supply chain was disrupted due to restriction of movement but recovered gradually with easing of lockdown. Supplies from national and international vendors remain unaffected currently.

Inventory in channel has reduced significantly.  

The Company is capable of fulfilling all obligations of existing contracts/ agreements and does not anticipate any significant impact on the business from nonfulfillment of the obligations by counterparties.

The Company¡¯s brand and fundamentals are well positioned to navigate through such extraordinary times. Management will continue to operate with a high level of agility and responsiveness. Government stimulus, front loading of various spends, structural reforms and favorable regulations will certainly help the broader economy and consumers in the near term. The Company remains focused on achieving sustainable and profitable growth.