Polycab India Limited analyst Q&A

Thank you very much. W e will now begin with the question and answer session. We will take the first question from the line of Sonali Salgaonkar from Jefferies.

Congratulations on a great set of numbers despite the Middle East disruption. Sir, my first question is of the Cables & Wires sales growth of 30%, if we could break up on the approximate growth -- volume growth in Cables & Wires and also the price hikes t hat we have taken from Jan till now in different tranches?

So Sonali, thank you for this question. So firstly, on the growth. Revenue growth, like you rightly mentioned, has been 30% for the quarter. And if I speak of volumes, it's been combined volume growth of low single digit for both cable and wire put together. Cables has, of course, outpaced wires. In terms of price hikes, we've taken approximately 18% to 19% price hike cumulatively from Jan to March.

Understood. That's helpful. Sir, secondly, how is the demand situation now? As we understand, it was severely impacted in March. March is a key month for your quarter. But since then, there has been some normalization of demand across sectors is what we understand. So how is the demand situation right now domestically?

So I just want to also highlight that Q4 last year for us was very, very strong . So at the back of that base, we've been able to deliver some volume growth and of course, revenue growth of 30- odd percent. So we have definitely seen some moderation in demand, primarily due to so much of volatility amidst Middle East escalation. But if you look structurally, the domestic demand is very robust. If you look at power capacity additions in the last financial year itself has been around 55 gigawatts to 56 gigawatts, which is almost double of what happened in FY25, right? And this is going to continue. If you look at the Union Budget, which was announced in February, a very strong INR 12.2 lakh crores budget announced, which, again, if you add private capex to that, we see today around INR 36 lakh crores, INR 37 lakh crores to be invested in FY27. Now majority of these investments, or rather 57% of these investments, are going into areas which are going to convert into strong demand for cable and wire. Sectors like utilities, metals, semiconductors, oil and gas, manufacturing, logistics, all of this is going to convert into strong demand for Cable & Wire. Also, there are new demand pockets which are yet to completely bloom, or we are yet to fully exploit the opportunity there, areas like defense, areas like data centers, which are yet to pick up in a big way. So I think one comforting thing is that in our in dustry, the demand doesn't extinguish. So it can only defer by 1 week, 2 weeks here and there. But if you look at 12-month period coming forward, I think not just the next 12 months, but I think 24 -36 months are going to be very promising for our sector.

Understood. Sir, and lastly, on exports, we do understand that on an absolute basis, it's been increasing. And we do understand that Middle East was a bit of a hiccup in the export story. But from here on, do you see exports resuming over the coming quarters? And which sectors would you be the most optimistic in exports?

So Sonali, exports is actually going to be a big lever of our growth going forward. So Middle East, I would just like to call out the split. So in full year, last financial year, the Middle East contributed around 16% of our exports topline. Now of course , that would have been slightly more had we had the normal March, but it got impacted. Going forward also and also in continuing the last few years of our export growth, the power sector will continue to drive the strong growth, right? If you look at EU, if you look at US, all of these regions have grid infrastructure, which is way beyond the average life. They are 50 -55 years, 60 years old. So all of these need modification. And considering our scale, our approvals, our deep penetration in these geographies, we are at pole position to capture the growth. And even the tariff situation has more or less settled, or we can say it's now behind us. So I think now we are at much more competitive and well positioned to leverage this growth. ` And to add to that, in U.S., we've started re -establishing our distribution network, which again is the largest market for export. So I think there, again, along with the tailwinds that we are seeing in the industry, I think all of this put together, we should have very siz eable business growth in exports. Plus the Middle East, which is currently severely impacted, we believe that it's a matter of time where that demand will come in a bigger way because a lot of reestablishment will need to be done there.

Sir, any outlook you would like to give at this point in time for FY '27 for the business as a whole?

So see, like I mentioned today, in this financial year, we are at 5.4% export contribution to overall top line. And we have to get to 10% by FY30. So we are definitely inching towards that figure. And of course, we are not limiting our domestic growth. So domestic growth is also growing at a very fast pace. But at the same time, I think now that the trade barriers seem to be much more favorable. And I think then we should continue to grow beyond 5% and difficult to give a firm number because these are more institutional sales in nature, but it will definitely be higher than where we are today.

Not just for exports, overall business, domestic as well?

So again, Sonali, if you refer the Project Spring guidance, which also I referred during my speech, is that we've committed in Cables & Wires, we will grow at 1.5x of market growth. So if market is growing, say, for example, 10 -12%, we'll continue to deliver 1.5x of that growth. And that, I think we've consistently been delivering in the last few years as well. So we can definitely account for that kind of growth from us.

The next question is from the line of Puneet Gulati from HSBC.

Congratulations on good numbers. First, if you can quantify what sort of impact you had in March on account of these Middle East-related disruptions?

See, we had low single-digit Cable & Wire volume growth. Typically, the Quarter 4 is highest, best for the industry, not just for Polycab. So obviously, looking at higher base of last year, we were able to still deliver some growth, but we were expecting much better growth. If you look at private manufacturing industries who us e gas as a feedstock, they did not have visibility of supply beyond 3-5 days. Their supplies, their inputs were completely rationed by government. That definitely impacted the demand from private sector. If you notice, our business model is such that 90% of our business happens through channel. Now the trade sentiment itself, with all the raw material prices going up, even if you look at PVC prices went up by 60% to 80% in the first fortnight of March. So all of this going on plus the trade sentiment due to West Asia crisis, there was definitely some impact in terms of lifting from our distributors, which is our primary sale, primarily because the secondary sale was not moving at the pace at which we anticipate in the month of March. So broadly, that's the outlook, I think, and that's very reflective of the industry also. And I think it's very difficult to quantify that. But definitely, our volume growth aspirations were higher in March, typically in line with the industry. Typically, March is the best month and Q4 is the best quarter.

Right. And even on the margin side, you said you had a higher share of institutional sales than usual. And today, you said it's about 90% of business happens through channel. What would that number have been for last quarter?

So in last quarter, Puneet, what happened was institutional sales were higher by about 2 -3% compared to channel . And our margins usually in channel are 3 -4% higher compared to institutional, which is you have to bid those tenders and win on L1. So our margins are better on channel. And if institutional mix grows, then it moderates our margins.

Clearly, yes. Understood. And if you can also talk about what is the status on capacity utilization now?

So see, here is where exactly you'll see the same number every time. It's mid -70s, 75 -76% utilization. And that is because we've continued to expand our capacity. As soon as we reach 70- 75% utilization, considering our AOP, we invest far ahead of time. So if you look at this year, again, FY26, we've invested almost INR 1,500 crores, massive number. So again, this capacity will get added when we discuss next time, we'll possibly again be sitting at somewhere around mid-70-80, right? So I think that's where we are. And we are continuing to expand, again, in line with our Project Spring guidance of INR 6,000 crores to INR 8,000 crores capex by financial year 2030.

And what is the peak utilization you can actually reach?

See, practically, I think at times, we have reached early 90s, but the standard percentages always remain around 80 -85%. You don't expect a plant to operate at 90 -plus percent. So 70 -75% is there. And we still have capacity and had there been demand, we would have possibly supplied more.

Understood. That's helpful. And lastly, if I may, you have a significant amount of cash. I know there is a nice capex plan, but you can fund it out of your own internal accrual as well. Is there any use of cash that you have in mind, acquisition or any new business that you want to enter?

See, currently, we are continuing to focus on these 2 things, which you rightly pointed out. One is pumping cash into our capex from internal accruals. Second is increasing the dividend payout, again, which is already laid out in Project Spring guidance. This year, again, we've increased it and reached payout ratio of 27.2%. So these two remain the focus. Of course, we keep evaluating certain M&A proposals and opportunities inside India and outside of India. So if something really aligns with our strategy, definitely, we will like to invest in that. But so far, there is nothing that we can see in the near to mid term.

We will take the next question from the line of Keyur Pandya from ICICI Prudential Life Insurance Company Limited.

The question is on the EBIT segment margin for the cables or overall EBITDA margin. Basically, it is within the guided range, but in the backdrop of, say, lower export mix or primary, secondary sales and stocking, where do you see it settling, say, in next 2, 3 quarters? How should we think of it? I think in last -- some of the interactions you have mentioned that channel stocking has happened. And since now copper prices are more or less where they are for last 3, 4 months, should we see some deceleration in stocking? So considering all this, how s hould we think of profitability as well as primary sales growth?

Keyur, on primary sales growth, I'll again refer you to the guidance we've given in Project Spring. And why I'm asking you to refer that again because that's very calibrated thought - through guidance. So if market grows, we will deliver 1.5x of that growth . If we are expecting 12% market growth, then we should deliver 18% and plus . So that will continue. In terms of price volatility, yes, we don't have any guidance on copper price. But whatever is the price, it is the pattern of the industry that we pass through that price to our customers and so far, that is how it has happened. So again, that's a very calibrated guidance which we have given that over long term, we should expect 11% to 13% EBITDA margin. and in the near to mid term, we may expect 12% to 14% EBITDA. And we'll continue to deliver that kind of margins.

But in the near term, are you seeing any challenge to primary demand or secondary demand?

No. I think like I mentioned earlier, in our industry, if a capex is decided and especially the stage at which India is, if you look at certain announcements by Indian government where they are pushing the pedal in terms of increasing renewable generation capacity, increasing the transmission and distribution sector, a lot of cape x is being pumped. So the demand can only defer by 1 week, 2 weeks, 3 weeks. It cannot extinguish. So if you look at full 12-month period coming ahead, I think the demand forecast is very robust and strong. And again, if you look at real estate sector, if you look at last 3 years, and we've seen some data of top 8 cities, we've seen around 3.5-3.6 lakhs units launched and sold. So we've seen in the first 3 months of this calendar year also, about 0.8-0.9 lakh units have been launched. So I think it's continuing. The growth momentum is continuing. In fact, the consumer sentiment also is slightly on the improvement side. We believe that demand, not just for this year, but I think next 2 to 3 years should be very robust. And the prime driver will continue to be the power sector. There are some new drivers which are yet to fully come to fruition, which is data centers, AI-driven demand, the defense, EV charging cable infrastructure, all of this is going to further open up.

Understood. And just second question on the exports. So you have mentioned a target for FY '30. But with current disruptions in the Middle East, and opening of new geographies post probably, say, U.S. where tariffs have relatively normalized. So how do yo u see recovery of exports in FY27, I mean, increasing as a percentage of sales?

So difficult to give a number, but I will tell you the driver . So I think in the last 3 to 4 months, we've re-established our distribution network in the United States . United States forms around 15% to 20% of global export market. That's the most key market followe d by EU, European Union. So we've sown the seeds of good growth, which is about to come. U.S. market or North America contributed around 40% of our FY26 exports,. But there, if we have a distribution network, then, of course, we are there to target higher growth. So U.S. will continue to drive the growth. We've done a sizable amount of business in South America, which has also comprised almost 20% of our sales in FY26. Middle East also contributed around 15-16%, but it looks like in the near term, we don't see Middle East contributing in a big way. But the big demand drivers, North America, followed by EU, South America, where we've again done significant amount of business. I think we are well poised to deliver higher growth in exports, and that should actually be at a more aggressive pace because we have to also reach 10% of our overall top line by FY30. And hopefully, we should get there sooner.

We will take the next question from the line of Pathanjali from Sundaram Mutual Fund.

Good set of numbers. Just a few questions. Firstly, in terms of capacity utilization, I think you mentioned we were around 70 -odd percent. Do we have any capacity coming in anytime soon in FY27? And is there a possibility that we may run out of capacity if that's not the case?

Pathanjali, thank you for asking that question. So I think in terms of capacity utilization, we were at full year basis, we were at 70 -75% kind of utilization. There is room for growth here. Plus if you look at our capex guidance, we've already pumped in INR 1,500 crores in this financial year. So that will also add to our capacity. And we are continuing to pump INR 1,200 crores to INR 1,600 crores every year, adding capacity. And this guidance that we've given under Project Spring is considering the demand outlook that we foresee in the next 4 to 5 years. So there will be no scenario where we'll be out of capacity.

Got it. And just another question. I think one of your peers were saying that the demand is very strong on ground, but they had some capacity constraint, which is why they were not able to grow in terms of volumes. We, on the other hand, have had like a f airly surplus capacity. But why are we also facing challenges in terms of volume growth? Because even on a full year basis, I think our volume growth may not be as high. If you can correct me with the number as to what our volume growth for full year was?

Sure, Pathanjali. So see, we will not obviously follow or go by what others are saying. But if you look at our numbers and let me start with Q3. I think in Q3 maybe peers had capacity constraint, but we recorded, 40% volume growth in both Cable & Wire together. So that is an indication of the capacity that we already have in hand . So I think today also, our volume growth for the full year is 18% which is again industry leading. If again, market has possibly grown at 11 -12%, we've delivered 18% volume growth . And revenue growth, we've coined it at 30%. So firstly, we are continuing to be there. And if you look at our base, our base is very, very high. I think the next biggest player is half our size. So at our base, we are able to meet those volumes, which we delivered last year and also gain some further volume growth over that. So I hope that answers you.

Just a related question to that. So I think your current quarter volume numbers were very less. So like you mentioned some of the reasons for it. But before going into this quarter, what would have been your volume target for this quarter so that I can understand like how much of it could be attributable to some external factors which are not within your control?

So Pathanjali, firstly, at least from a business standpoint, I can speak that there's no volume target for quarter. If you can look at 12 -month period, it's still understandable. Every day, you don't sell 1.5x or whatever is the volume target, right? So it's ultimately an institutional B2B kind of a business. It's not an FMCG business. So if you look at full year basis, like we've always guided, we'll continue to deliver 1.5x of GDP growth. Now whatever happened in March, some bit of it, you can attribute it to some kind of a black swan event, which impacted our exports to a large extent in Middle East. In domestic market also, somewhat sentiments were disturbed. And hence, I think th e industry also did not grow to that extent. So whatever we've delivered is again the best side of the industry growth.

We will take the next question from the line of Akshay Gattani from UBS.

Sir, if you can share the status update of your EHV capex, when do you see commissioning of this capacity? And how do you expect revenue pick up from this capacity?

So Akshay, EHV is very much on track. Capacity is expected to come on stream by end of this calendar year. And in FY28 revenues, we can see some contribution from EHV capacity because it's a tender -based business, and we see a ready market because about 5 0% of domestic consumption today is coming from imports. So we believe that there's a ready market available. So as soon as we are on stream and we bid, I think we should be able to get revenue. So in FY28, you'll be able to see revenues from EHV.

Got it. And for FY27 capex, what will be the focus areas? And a separate question on that is how much the solar business now accounts in FMEG revenue? I think earlier it was more than 50%. Has it moved up?

So you had 2 sets of questions. So let me address the solar one first. So primarily, we don't give breakup of the intersegment contribution in FMEG. But solar, of course, continues to be the strong driver, delivering 2x of growth over last year. And that will continue because of central and state government schemes on rooftop solar. Besides that, other FMEG segments have also delivered stellar performance and far ahead of industry growth in each of the respective segments. What's the other question?

Got it. Other was capex -- focus area for capex in FY27?

So again, as per our Project Spring guidance, we've said that whatever we will pump, around 90% of that will go into Cable & Wire capacity expansion alone . And some 5% will go into backward integration and another 3 -4% may go into FMEG expansion. So I think we are very much aligned with that. And 90% will continue to go into Cable & Wire expansion. And largely, these are all fungible capacities. Other than EHV, if you look at it, Cable & Wire are largely fungible capacity. So we'll continue to expand our capacity there itself.

We will take the next question from the line of Umang Mehta from Kotak Securities.

Congrats on a strong year. You mentioned volume growth was around 18% for the full year. Can you split it as how much was the volume growth in wires and how much was it in cables? And in cables, what were the key sectors which kind of contributed to this? Two quarters back, you had mentioned that on an annual basis, you would have a better picture on demand markets. So that would be helpful?

So Umang, overall, if you see in the full financial year also, the cables growth was slightly better than wires. And overall, like I mentioned, 18% volume growth, which has resulted in a market share gain of around 3% to 4% in this financial year alone . And secondly, on split of demand side you're asking in terms of our supply. So I think that largely, if you look at 12-month basis, it will always continue to be more or less same. So where power sector alone consumes around 40% to 45% of cables. Manufacturing and private industries consume around 35% to 40% of cables. Mobility, which is railways, roadways, highways, seaports, airports , consume around 10% to 12% of the cables. And energy exploration, which is again, oil and gas, coal, mining and all of that, they consume around 5-6%. Balance is a niche space, which is defense, EV charging infrastructure and all of that.

Got it, Shashank. Sir, just a follow -up on this is that you also mentioned that capacity of generation in India doubled last year. And in terms of solar capacities, while I understand that investments will continue, the growth on a Y-o-Y basis may not be as strong as what we've seen last year, right? Even in DISCOMs, the RDSS execution possibly was a big driver. But going ahead on a Y -o-Y basis may kind of moderate on a high base. So in that context, how do you think industry growth will kind of shape up?

So see, I look at this power, especially T&D industry, from a relative scale. If you look at period from 2016 to 2020, the intensity or the pace at which the actual execution is happening today is far, far better. If we look at that period of 2015 to 2020 or 2020 to 2025, we see the transmission line execution on ground was somewhere around 15,000 circuit kilometers average. Today, going forward, the anticipation is that it should go to 21,000 - 22,000 circuit kilometers per year. Now so much of renewable capacity is getting added. All of this has also to connect with the transmission and distribution space. One more point is that in power sector alone if INR100 is spent on transmission and distribution, the translation to cable requirement is around 15% to 20%, which basically indicates that any amount invested in power sector will translate into heavy demand for cable and wir e. So we believe that this is definitely going to continue even if it moderates, the intensity will be still far higher than how it has been in the past.

We will take the next question from the line of Achal Lohade from Nuvama Institutional Equities.

Congratulations for a good set of numbers. The first question I have, in the third quarter call, you did mention about delay in passing on the price inflation. So that kind of had some impact on the margin. Was there any such thing in the fourth quarter? And -- or on the other hand, was there any inventory benefit, inventory gain during the quarter, which you could have realized?

Achal, so in the very first fortnight of January alone, we were able to pass on everything. So we were completely in tandem with the raw material price throughout the quarter. So first question answered that there is nothing that we are withholding. We are completely in tandem with the raw material prices. Achal, can you repeat your second question?

All 3 companies have indicated in the recent con calls that there has been some benefit on the inventory realization front during the quarter. Was that the case for us as well? And if you could quantify?

So Achal, I mean, we have explained in the past also, the way we procure our raw materials, there are never any inventory gains. We don't buy on spot, right? So we have a hedging mechanism in place. So we don't have any inventory gain unlike peers. Possibly, they might buy in spot market and sell. So when prices go up, they have some kind of an advantage possibly. But we are always at a position where we are able to manage within a band, and thanks to the mechanism that we have built over the years, where we hedge our raw material prices. So hence, there is no inventory gain or loss, never in our case.

And when you say we hedge, it's for both aluminium and copper because I presume aluminium is more domestic sourcing than copper. Copper is 100% imports, right?

Understood. Just a related question on that. You did mention the PVC prices actually kind of doubled in the first fortnight. So I wanted to check these insulation materials, in terms of the price inflation or cost inflation on account of that, has that been passed on? Is there a challenge in passing that? And, in terms of the availability, particularly materials like XLPE, etc? If you could talk a little bit on that?

So Achal, first thing, we completely pass on all the raw material price, be it aluminum, copper or be it PVC. So there has been no challenge with respect to passing on the price . Second is on the availability of XLPE and other compounds. So thanks to the backward integration that we have, we typically purchase only the raw resins, and we do compounding in-house. So thanks to our heavy inventory, we are comfortable for possibly in the first quarter of coming year as well. But beyond that then it depends, and then there'll be far bigger issues to worry than production of cable and wire. But I think we are very much comfortable. We have a good amount of diversified base of vendors for compounds and resins. So we are not at all concerned about raw material security.

Perfect. Just a bookkeeping question in terms of the institutional mix, if you could quantify for the fourth quarter as well as FY26?

So see, overall, I think for a full year basis, if you see, I think a couple of percentage points higher in institutional for the quarter, maybe 3 to 4 percentage points higher in institutional.

No, I was keen to know if you could quantify exactly how much would be institutional for us out of the total Cable & Wire business?

So Achal, the other way to look at it is and the way we always recite this is our channel to institutional contribution has always been 90% to 10%. 90% is channel, 10% is institutional. So when we say a couple of percentage points higher in institutional, you can add a couple of percentage points to maybe make 10% to 12%, 12% of overall top line. And if I say 3% to 4%, you can make it 13% to 14% for the quarter.

Understood. And the second, if you could give us EBITDA number because the guidance is on EBITDA, if you could disclose what is the EBITDA margin for Cable & Wire segment for the fourth quarter and the full year FY26?

See, for the fourth quarter it was higher. So definitely around 14%, 14-plus percent. And FMEG, of course, was also mid-single-digit EBITDA margin.

And for the full year, Shashank, if you could quantify?

We will take that as the last question. I would now like to hand the conference over to Mr. Niyant Maru for closing comments.

Thank you, everybody. It was nice to have you all on the call. Maybe I think I just wanted to add one last comment. I think many times when we look at the quantitative part, the larger part, which we get sometimes unnoticed is that as a company, in the in dustry, we have been gaining market share. And we continue to do so in the quarter 4. I think once the numbers are announced for everybody, then we will have a better idea of what is the real increase in the market share, but we do believe that we have continued to gain market share in Q4. Thank you, everybody.

Thank you, members of the management. On behalf of Polycab India Limited, that concludes this conference. Thank you all for joining with us today, and you may now disconnect your lines. Thank you.