Polycab India hosted a conference call on Jan 19, 2024. In the conference call the company was represented by Inder T. Jaisinghani, CMD and Gandharv Tongia, ED.   

Key takeaways of the call

Revenue grew by 17% YoY in Q3FY24 on the back of strong volume growth in wires & cables business.

Wires & Cables revenue for 9MFY24 and Q3FY24 grew by 29% YoY and 18% YoY respectively, on the back of strong volume growth. Demand momentum continued to be strong supported by government and private capex. Domestic volume of C&W was up 20%YoY with growth of cables better than wires. The growth in wires has slowed in some states due to elections, along with the high base effect of last year which saw peak sales. Domestically, while both distribution and institutional businesses of C&W exhibited strong performance, institutional business growth outpaced distribution business growth. Revenue from international business contributed 6.2% of the consolidated revenue for the quarter.

FMEG business exhibited de-growth of 15% YoY in Q3FY24, primarily attributed to sustained weakness in consumer demand.  The Fans segment grew sequentially, but exhibited YoY de-growth, on account of a higher base of previous year due to stock liquidation activities prior to the BEE transition. The Lights segment continued its de-growth, driven by further pricing erosion. But the  Switches & Switchgears segments demonstrated robust YoY growth during the quarter.

Higher A&P spends and absence of economies of scale led to accelerate bottom-line de-growth in case of FMEG.

Polycab’s A&P spends expanded to 2.1% of revenue in Q3FY24 vs. 1% in Q2 on account of advertising during the Cricket World Cup and a brand revamp

Overall EBITDA margin for Q3FY24 at 13.1%, was down 50 bps YoY basis and down 130 bps QoQ. And this is largely on account of higher bought-out items and higher A&P spends. However EBITDA margin  for 9MFY24, improved by ~120 bps YoY to 13.9% led by improved gross margins via strategic pricing revisions as well as change in product-mix contributed to margin improvement.  

 EBITDA margin of C&W in Q3FY24 was 14% compared to 14.7% in Q2FY24 and 13.8% in Q3FY24. Sequential decline in margins of C&W by  about 70 bps in Q3FY24 was on account of lower sales contribution from international business and higher A&P spends.

The long term sustainable EBITDA margin of C&W will be in the range of 11-13%. Annual sustainable operating margin of EPC business is expected to be in high single digit over mid-to-long term.

The Company expects strong performance in the international C&W business during Q4FY24 and beyond. The company have pretty good C&W export order book.

The FMEG and Power business verticals have been merged under a unified Business Unit Head.

Utilisation for the quarter stood at 70-75% for wires and cables and this can go up to 95%.

Capex for the quarter and nine month ended Dec 2023 stood at Rs 280 crore and Rs 640 crore respectively. Expects to incur Rs 800-900 crore of capex for FY24 with the target for FY25 in the range of Rs 600-700 crore.

The company expects exports to be in line with the 10% contribution target by FY26 under Project Leap.

Expects exports to normalize to 10% of sales in a few quarters, aiding margins going forward.

A&P spends will remain between 3% and 5% of B2C sales on an annual basis.

The company reiterated that it is yet to receive any official communication regarding the outcome of the IT department searches at various premised of the company recently and the company’s operations are running smoothly. And it refrained from commenting further on the matter.

CAGR growth in revenue of 18% by FY26 fixed under project leap is maintained.