Polycab India held a conference call on 11 May 2022 to discuss the results for the quarter ended Mar'22 and way forward. Mr. Inder T Jaisinghani- Chairman and Managing Director and Mr. Gandharv Tongia - CFO of the company addressed the call.

Highlights of the Concall

• Q4FY22 revenue grew by 35% YoY and 18% on a QoQ basis with relatively better growth in wires and cables segment. Business environment was supportive as healthy demand environment was seen in both the segments despite sharp inflation coupled with strong execution led to continuing sequential performance

• Macro indicators such as GST collections are at new highs, while other indicators like IIP, core industries index, consumer sentiment index, amongst others are trending up. Government initiatives and reform are certainly helping. Fresh campus announcement for towards transitioning to a renewable energy ecosystem globally is like never seen before. All of these are obviously good signs of an initiation of a long capital investment cycle which bodes well for the business.

• On the contrary, the company now considers inflation as perhaps one major risk to the improvement demand environment.

• The company mentioned that quality of wires and cables is paramount for health and safety. And hence its customer segments which is largely mid or premium do not want to leave.

• EBITDA margin improved sequentially by 125 bps to 12% led by price hikes and better operating leverage, partly offset by persistent input cost pressures.

• Net Cash position stood at Rs 1100 crore as of March 2022 end as against Rs 960 crore last year despite a one-off investment of Rs 200 crore in office space.

• Wires and Cables revenue grew by 39% YoY despite a relatively healthier base. Demand environment continued to remain encouraging.

• Domestic distribution driven business in wire and cables continued to see strong traction. However, institutional business, while growing, was subdued compared to last quarter.

• Wires grew faster than cables. Housing wires posted strong growth led by continued momentum in real estate and renovation activities as well as demand generation initiatives. A new sub brand “Etira” was launched in the economy price segment. Trade sentiment in Cables was temporarily restrained by significant volatility in aluminum prices.

• Wires and Cables exports business was nearly 2x of last year and 2.2x excluding a large customer. Demand from sectors like oil & gas, renewables and infrastructure remained strong globally. Overall, exports business was 7.6% of consolidated revenue in FY22

• FMEG (fast moving electrical goods) business grew 9% YoY and 11% on a sequential basis. Overall demand momentum in Q4 was albeit subdued largely attributable to broader inflation. The business also underwent realignment exercise to improve sales force efficacy and achieve distribution synergies.

• Fans, lights and switchgears business posted healthy growth while conduit pipes continued the strong momentum. Switches saw a decline due to supply challenges. Transition to inhouse manufacturing of switches is ongoing. Solar business was muted however for the full year it achieved over 50% YoY growth.

• FMEG business profitability improved on a sequential basis but was lower than last year largely on account of higher A&P, staff cost and input cost pressures. The company is committed to achieving 12% annualized EBITDA margin in this business by FY26.

• The company has invested about these Rs 200 crore to acquire around 55000 square feet of office space which is very close to its existing head office. Part of this will be compensated by monetization of existing office.

• The company authorized dealers and distributors increased from over 4100 last year over 4600 now. Retail outlet has increased by nearly 25% over last year to about 205000 outlets now.

• Premium products now cover around 16% of total FMEG products which was around 7% last year.

• The company is targeting a topline of Rs 20000 crore over a period of five years