POLYCAB INDIA LIMITED (POLYCAB) Q4 FY22 Earnings Concall Transcript

POLYCAB INDIA LIMITED (NSE: POLYCAB) Q4 FY22 Earnings Concall dated May. 11, 2022

Corporate Participants:

Chintan Jajal — Head of Investor Relations

Gandharv Tongia — Chief Financial Officer

Inder T. Jaisinghani — Chairman, Managing Director

Analysts:

Naval Seth — Emkay Global Financial Services Ltd. — Analyst

Ravi Swaminathan — Spark Capital Advisors Limited — Analyst

Sonali Salgaonkar — Jefferies — Analyst

Renu Baid — India Infoline — Analyst

Rahul Agarwal — InCred Capital Financial Services Private Limited — Analyst

Atul Tiwari — Citigroup Inc. — Analyst

Achal Lohade — JM Financial Ltd. — Analyst

Chetan Gindodia — AlfAccurate Advisors — Analyst

Nitin Arora — Axis Mutual Fund — Analyst

Aniruddha Joshi — ICICI Securities — Analyst

Presentation:

Operator

Ladies and gentlemen. Good day, and welcome to the Polycab India Limited Q4 FY ’22 Earnings Conference call.

[Operator Instructions]

And there will be an opportunity for you to ask questions after the presentation concludes.

[Operator Instructions]

I now hand the conference over to Mr. Gandharv Tongia, thank you, and over to you, sir.

Gandharv Tongia — Chief Financial Officer

Thank you, operator, good afternoon everyone and thank you for joining us. I hope you all are staying healthy and safe. I’m Gandharv Tongia, CFO at Polycab India Limited. On this call, we shall discuss the Q4 FY result, which was approved in the Board meeting held yesterday. We will be referring to the earnings presentation, financial results, and financial statements, which are available on the stock exchanges as well as Investor Relations page of our website. It can also be downloaded through the link or QR code. On slide 9 of earnings presentation. Joining me today from the management team we have, our Chairman and Managing Director, Mr. Inder Jaisinghani; and Chintan Jajal Head-Investor Relation on the conference call. Let me now turn the call over to Inder bhai for his comments.

Inder T. Jaisinghani — Chairman, Managing Director

Good afternoon, everyone. Our strong performance in the fiscal year ’22 was underpinned by the extraordinary efforts of our team to achieve new milestone even in one of the most uncertain environments, we delivered escalated business growth, record-free cash flow, healthy returns on the capital, and market leading share of the returns. We will champion our renewed purpose of the innovation innovated — innovating for a brighter living, our high power will hype our thoughts and actions which will help us create long-term sustainable value for shareholders and indeed those results in a way lines up of everyone connected to Polycab. I now request Gandharv to take you through our earnings presentation.

Gandharv Tongia — Chief Financial Officer

Thank you, Inder bhai. I think overall business environment has remained quite supportive in Q4 despite this half inflation. Demand across most segments we may healthy, macro indicators such as GST collections, e-way bill are at new highs while other indicators like IIP, core industries intake, consumer sentiment index amongst other are trending up. Government initiatives and reforms are certainly helping and even capacity relation across most private industry, at good levels. Fresh capex announcement are at multi decade high, post towards transitioning to a renewable energy driven 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 our business.

On the contrary, inflation is not perhaps the one we adjusted to the improving demand environment. While we do not anticipate it to be any more challenging and B2B segment, we will remain watchful of consumer sentiment and how it plays out for B2C categories. One key question raised by many is that copper and aluminium prices have gone so high. What is a beginning demand for buyers and cables. Generally what we have seen is that first the macros are broadly considered. Secondly, inflation is quite broad-based many industries are seeing a stronger balance sheet. For example, given the higher crude oil prices, many projects in oil and gas globally have devised, similarly many sectors like metal have benefited.

Lastly, but most importantly, quality of wires and cables is paramount health and safety and hence our customer segment, which is largely mid or premium, do not want to risk it. Nevertheless cognizant of the challenges we remain agile through our portfolio and go to market interventions that gives us confidence to drive industry-leading growth before we move on to presentation and financial review, I would again like to highlight to the P&L and segment number for current and prior comparable period are restated due to divestment of acquired base in accordance with the applicable Indian Accounting Standard, all related, and expenses on divestment are requoted under profit from discontinued operations as seen on the pace of tender in consolidated financial statements.

This along with few exceptional items of last year are also presented in slide 10 of this presentation. Moving on to slide 4, for the quarter ended 31st March 2022, our consolidated revenue grew by 35% year-on-year on the back of healthy demand environment, despite sharp inflation coupled with the strong execution by our team, it is yet another quarter of highest quarterly sales we have ever recorded. As we have been highlighting earlier one key focus area remain improving profitability progressively. Even though most of our key inputs remain quite elevated. I’m happy to share that EBITDA margins improved sequentially by about 125 basis point that’s in 12% led by better operating leverage and price hike.

Other expenses and other income as a percentage of sales were lower while finance cost were broadly stable. Our detailed breakup of our other income and finance costs have been provided on Slide 13 of our earnings presentation. Our profit before tax at rupees INR4.3 billion increased by 17%, while adjusted profit after tax at would be INR3.2 billion, decreased by 20% year-on-year respectively. On slide 5, for the full year ended 31st March 2022, our revenue grew strongly by 39% year-on-year, despite the two waves of pandemic and unprecedented inflation. EBITDA was up by 14% with 10.3% margin. Adjusted PAT also grew by 14% year on year. It was a year full of challenges but we achieved several significant milestones. Our overall top-line surpassed be INR120 billion clocking 17% CAGAR in the last five years.

The export is inching towards becoming a sustainable INR10 billion business. Polycab is the largest exporter of cable and wire in India. FMCG is now rupees INR12 billion franchise. The business also turned out healthy cash flows in negligible debt labor. Moving onto segment on slide 6, our wires and cable revenue grew by 39% year-over-year despite a relatively healthier base demand environment continued to remain encouraging which led to healthy volume growth. Domestic distribution driven business, continued to see strong traction however institutional business was subdued compared to last quarter. Housing wires posted strong growth led by continued momentum in real estate and renovation activities as well as our demand generation initiatives, our new sub-brand Athena was launched in the economic price segment.

Trade sentiments in cable was temporarily restrained by significant volatility in Aluminium prices which does nearly $4,000 per metric ton before correcting sharply, export business grew by nearly 100% year-on-year, excluding a large customer, the growth was slightly better led by strong demand from sectors like oil and gas renewable and infrastructure. Overall exports business was 7.6% of consolidated revenue in FY22. Our telecom business saw good traction towards the year-end Polycab was on-boarded by Tamil Nadu Fiber Corporation Limited or TANFINET as a master system integrator to implement the BharatNet Phase 2 project and provide end-to-end connectivity with high-speed bandwidth using optical fiber cable in over 3,000 gram panchayat in 75 blocks across nine districts of the state at a cost of about INR5 billion under the master service agreement.

The revenue of this project will be accrued for executive timelines over the next few years wires and cable segment margins continue to improve sequentially led by judicious price hikes and improved operating leverage. During the quarter, inflation in our raw material basket as well as price hike was in mid-single digits. On slide 17 our FMEG business grew 9% year-on-year and 11% on a sequential basis. Overall demand in momentum in Q4 was a bit subdued largely attributable to broader inflation. The business also underwent realignment exercise to improve sales force efficacy and achieve distribution synergy which temporarily hampered growth.

Fan, light and switchgear business posted healthy growth while continued price continued the strong momentum, such as for decline due to supply challenges. Given the prolong challenge in switchgear we are now transitioning to in-house manufacturing, which is ongoing and likely to be completed in the current fiscal, the new state-of-the-art facility in Daman will help us improve product availability, drive innovation, and reduce go to market time thereby improving our market presence significantly.

Solar business was muted, however for a quarter full year it over 50% year-on-year growth, profitability improved on a sequential basis, but was much lower than last year in our expectations largely on account of higher advertisement publicity, the staff cost, and net input cost pressure. However, we are committed to achieving 12% annualized EBITDA margin in this business by fiscal ’26. On slide 8 other segment, which largely comprise of our strategic EPC business witnessed a 8% year-on-year increase in revenue to INR827 million, EBITDA stood at INR122 million, down 15% on year-on-year basis. On the balance sheet side, our financial position remains quite strong, net cash position stood at INR11 Billion up from INR9.6 billion, same period last year.

Debt to equity ratio is merely 0.01x our efforts to optimize working capital is taking shape, we are seeing good optimization of receivables as well as inventory. I would also like to highlight that towards the end of the year, we made a large one-off investment for buying office space in Mumbai. As we move forward in our growth journey, our teams are expanding. However, the current head office building has limited space to accommodate everyone in near future at the same time we are also mindful of one other important element that is having adequate open spaces for our cross-functional collaboration and create an inclusive work display.

Hence we invested about INR2 billion to acquire around 55% square feet of office space in Mumbai, very close to our existing head office. Our path of this cause will be compensated by monetization of existing office in Mahim. We are quite excited to move to our new head office hopefully by third quarter of the current fiscal, the cost is reflected in the fourth quarter and full-year capex number. In the meeting yesterday board has recommended for the payment of final dividend of the INR40 per equity share for the year ended 31st March ’22 subject to the approval of the shareholders.

Our dividend payout ratio on term corporate sequentially improved further to about 23% in FY ’22 moving onto exciting stuff, Project Leap our flagship transformation project, just to recap for everyone Project Leap is a multiyear program that includes a range of strategic teams and initiatives focused on growth, profitability and long-term capability building for the organization across B2B and B2C businesses with a goal of achieving greater than INR200 billion or INR20,000 crores sales by fiscal ’26. We have partnered with global management consulting firm BCG who will help us drive this transformation. It’s been one year in the journey and we have made significant strides towards our vision.

In the first year we primarily work on four key areas that is set of a flight organization enablers, customer-centricity, go to market, and product portfolio optimization, diving deeper in the first, that is setup of right organization within us, within this, the major initiative was setting up the right organization structure and fill critical capability gaps across the departments like manufacturing, procurement, supply chain, digital, and IT and across the businesses including B2B, fans and retail wire. Over 90% of talent acquisition for critical growth was completed in fiscal ’22 while the balance will be done in the coming quarters.

Performance measure, rewards, and recognition, we aligned to the growth strategy and cascaded through all levels of team. New transformation management office was set up with stand up governance and most importantly monitor the implementation of various initiatives because we believe we have an ambitious vision for our organization. We also have the enablers so education has to be some line. Second area is customer-centricity during the past year, we redesigned the operating model of B2B businesses. The new model was implemented in pilot stage and saw tremendous opportunity for growth. Accordingly, we took a bold structural move to merge heavy duty and light duty verticals in order to unlock latent value through cross-selling opportunities and operational efficiencies.

Given the significant distribution and geographical overlap the initiative with materially improved customer servicing has most of their B2B wires and cable requirement will be addressed by single point of contact. Combined portfolio selling will drive faster business growth. Optimization of team structure and joined back office operation will also enable faster rollout of GTM initiative while establishing a leaner cost wide marketing and implies that management platforms will be streamlined to increase efficacy, I think you see the new structure also includes key account management or KAM to enable selling of full product portfolio and bring in more customer focus, we designed and piloted unique structured influence management to support our B2B businesses.

Third area is GTM, I have talked about this earlier as you may be able aware to be put in lot of efforts to build presence in semi-urban and rural India. Post successful pilot project we rural market we took several initiatives to build up infrastructure, portfolio, and team to leverage the immense demand potential of semi-urban and rural India. We created a new business vertical called Emerging India, focusing on building present in towns with up to 2 lakh population distribution architecture was designed post-retail netting and evaluation of these geographies. Product portfolio is being calibrated to add the specific needs of customers while offering innovative product at economical price point.

Another area where we’ve really worked hard over his building presence in alternate channels like e-commerce, modern trade, canteen department stores. Currently over 600 Polycab products are available on all leading e-commerce portals like Amazon, Flipkart, JioMart, and Moglix. We believe these two new sales channel vertical will act as additional lever of growth for our B2C business. Core distribution expansion was driven by rigorous execution using digital tools and structure playbook. We process expansion clocking in nearly 2x increase in direct comp coverage our authorized dealers and distributors increase — increased from over 4,100 last year to over on 4,600.

Retail outlet reach increased by nearly 25% over last year to about 2,05,000 outlets now. We also successfully piloted end to end digitalization of front-end sales. It is currently being rolled out in base manner. Lastly, we are trying to create a winning portfolio of products which are innovative and there is no consumer need. Towards the end of FY ’22 we launched new sub-brand Etira, which will play notable in economy price segment as well as enable our expansion into emerging India clusters. Currently we have launched housing wire which has seen a strong response. We will extend this brand to other categories progressively.

Overall, we have built us robust portfolio roadmap for next three to four years, across large businesses. This will ensure via presented in segments which are growing faster and are margin accretive. NCD or new product development concepts have been set up across businesses for structure review and governance of innovation initiatives. We also saw healthy progress in premiumization journey for example Green product now contributes 16% to overall FMCG business which was just 7% last year. So that was probably in FY ’22. Going ahead we have chalked out some key focus areas for next year. One is improving customer centricity through announcing visibility and control of secondary sales by significantly improving our understanding of end-users and influences.

Secondly, we will aim tirelessly on executing these NCD roadmap to market share gains, as well as premiumization. Third again go to market where we aim to digitalize the entire distribution ecosystem and lastly emphasize on governance where we will monitor progress towards clearly defined growth and profitability drivers for all building blocks. So that about it on Leap. We will continue to share periodic updates and we are excited to see how the coming year pans out. While there could be challenges like inflation, pandemic amongst others. We are confident of our strategy and — which will enable us growth this proportionately. Thank you for your patiently hearing us out with that I hand over the call to operator for Q&A.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session.

[Operator Instructions]

The first question is from the line of Naval Seth from Emkay Global. Please go ahead.

Naval Seth — Emkay Global Financial Services Ltd. — Analyst

Yeah. Thank you. And congratulation Gandharv for stellar performance. Few questions, first can you outline what was the value and volume mix for 4Q and FY ’22 for cable and wires in FMEG?

Gandharv Tongia — Chief Financial Officer

Thanks Naval, thanks a lot for your compliment. If I talk about cable and wire we can proudly say that around 25% of the total growth can be attributed to volume and balance for value and in FMEG it was very calm product that product into category, but it would have similar trend there as well.

Naval Seth — Emkay Global Financial Services Ltd. — Analyst

Okay. Second, on your Project Leap as you stated that in terms of your dealer distributor expansion of 12% and retail outweighed by 24%, 25%. Now, I see that this — the major increase has come in 4Q because your corporate presentation of January suggest the same number of 4,100 and 1,65,000 and now it has expanded and during the same period your market share has also improved by 200 basis point. So now as you have outlined your strategy very clearly. Can you also share what is the aspirational market share, you want to reach with the kind of aggression you are outlining in Project Leap?

Gandharv Tongia — Chief Financial Officer

Sure. So the first one on the data points, these data points generally we revise on annual basis, so the presentation you had I think December probably had March data point and we’ll continue to revise these data point to analyze this. As far as aspiration is concerned, Naval you know our history, Inder bhai got into this business almost five decades back there were noone and cable industry. We got to number one position in cable. Wire we started in 1996, we are number one, we enjoy 24% of market share of organized market and as we go along we want to outpace the industry and our peers and grow in disproportionate manner. As part of Project Leap broadly we are targeting INR20,000 crore rupees of top line over the period of five-year. Last year in FY ’21 as we exited up to INR9,000 crore rupees of top line. In the first year Project Leap we have already we got INR12,000 crore rupees. So it seems that we would be able to achieve INR20,000 core piece of top line under Project Leap.

Naval Seth — Emkay Global Financial Services Ltd. — Analyst

So is it fair to assume 200 basis point kind of a number, market share improvement year-on-year at least in this Project Leap period?

Gandharv Tongia — Chief Financial Officer

I can certainly talk about the past this year effort would be two, we have achieved, we would have gained at least 200 basis point of additional market share. Where aspiration on the Leap is to enjoy our leadership position and further enhance it and even for FMEG the aspiration is similar that slowly and gradually we should get a good top five market player then to top three and eventually in few select for a categories to move upward even from top three to further not.

Naval Seth — Emkay Global Financial Services Ltd. — Analyst

Sure. Last two things, one is clarification that volume value mix you stated was for FY ’22. Is that correct?

Gandharv Tongia — Chief Financial Officer

Yes.

Naval Seth — Emkay Global Financial Services Ltd. — Analyst

Okay, and lastly can you provide some color on capex spend for FY ’23?

Gandharv Tongia — Chief Financial Officer

So historically we have incurred around INR300 crore, INR350 crore every year exception was last year where we incurred INR300 crore for regular capex and INR200 crore for a new office, which I dwelled up — alluded to in the opening remarks. As we go along, I think the number between INR300 crore and INR350 crore is a sustainable capex number. Having said that in year two of Project Leap we would explore what we need to do differently. For example, that getting into additional product categories or further building on M&A initiatives. So excluding these two because they are still under study stage a number of INR300 crore to INR350 crore is what we should factor in for FY ’23 as far as capex is concerned.

Naval Seth — Emkay Global Financial Services Ltd. — Analyst

Sure. Thank you and all the best. I’ll come back in the queue.

Gandharv Tongia — Chief Financial Officer

Thank, Naval.

Operator

Thank you. The next question is from the line of Ravi Swaminathan from Spark Capital Advisors Limited. Please go ahead.

Ravi Swaminathan — Spark Capital Advisors Limited — Analyst

Hi, sir. Good afternoon. Congrats on very good set of number. If you can give a breakup of the wires and cables business in terms of ratio of how much is cable and how much is wire. can you give that breakup midway.

Gandharv Tongia — Chief Financial Officer

Sure. Thanks. Ravi for your compliment. Cable and wire broadly I would believe that we are in early 50s as far as cable is concerned and the balance by us. In total basis if I give you a breakup of entire INR12,000 core piece of top line around 60% would be 50%, 60% would be B2B and around 40% give and take 1 or 2 percentage point would be B2C.

Inder T. Jaisinghani — Chairman, Managing Director

40% would be B2C. Okay. And majority of the 40% on Y…

Gandharv Tongia — Chief Financial Officer

Yeah. So around 10% of our topline is FMCG which is fan, light and all these products and balance is wide.

Ravi Swaminathan — Spark Capital Advisors Limited — Analyst

Right, okay, and any difference in strategy between the growth in cables and wires. I mean do we aim for higher growth in wires, these are cables or vice versa. Is there any view on that because wires, I believe have better margine than cable, so just what are your views on that?

Gandharv Tongia — Chief Financial Officer

Absolutely. Your understanding is absolutely correct. Wires are more profitable because of B2C product whereas traditional cable are B2B where the profit margins are comparatively lesser than wires. Anywhere else I have mentioned to Naval a while, back objective is to get to number one position in all the product category and then significantly expand our presence there, enhance our positioning. Though wires is more profitable, but I don’t think the strategy is that we would like just focus on our wires. We are looking for more holistic picture, wherein we want to go for growth across all the product categories where we are present. Inder bhai believes that if you are in a product category you should remember number one, if you don’t want to be number one, you should not be in the product category and that’s the batting sense for which we are trying to follow across all the business segments where we operate.

Ravi Swaminathan — Spark Capital Advisors Limited — Analyst

Got it, sir. And the better volume growth that we would end user on. The next one, two years in the wires and cable segment. What would be the target that we will be having? Any sense on that?

Gandharv Tongia — Chief Financial Officer

I can give you a directional thought process, won’t to be able to give a number you can safely assume that we are going to grow significantly higher than the industry growth.

Ravi Swaminathan — Spark Capital Advisors Limited — Analyst

Got it, sir. And my final question is with respect to FMEG business, can you give the revenue breakup on the INR1,050 crore revenue growth in terms of fans, lighting, pumps, etc.?

Gandharv Tongia — Chief Financial Officer

Yeah, absolutely. So fan would be around one-third of our top line of FMEG and switches and fits were going to be around 15% light and lumin would be around 15% and then there would be at a small business categories.

Ravi Swaminathan — Spark Capital Advisors Limited — Analyst

Got it. Sir. Thanks a lot.

Operator

Thank you. The next question is from the line of Sonali Salgaonkar from Jefferies India. Please go ahead.

Sonali Salgaonkar — Jefferies — Analyst

Sir, thank you for the opportunity and congratulations on a great set of numbers. Sir. Sir, my first question is regarding the price hikes. Would you be able to elaborate what is the quantum of price hikes that we have seen in FY ’22 and particularly in Q4 and also any price hikes that we have taken from 1st April onwards.

Gandharv Tongia — Chief Financial Officer

Sure. Thanks Sonali for your compliments. If you talk about fourth quarter the project, raw material product basket label we witnessed inflation and mid single-digit and more or less the price hikes we have taken is in similar range and that is where you can see the contract, the contribution margin of March quarter is comparable with December quarter. So we have been able to pass almost all the input cost increases to our end customer in the current quarter.

Sonali Salgaonkar — Jefferies — Analyst

Right. and cumulative FY ’22 and from 1st of April.

Gandharv Tongia — Chief Financial Officer

Yeah. So from the next year, the business model, the business model is we try to recalibrate our prices on a clear is after factoring two data points, one is changing the commodity prices thinking is change in USD INR exchange rate so we’ll continue to do that, the intent is who maintained traditional cable and wire margins, which used to be between 11% to 13%. So our intention is to be in that range.

Sonali Salgaonkar — Jefferies — Analyst

Got it, sir. Sir, my second question is regarding your B2B and B2C business, you mentioned that 60% is B2B right now. Sir, what could be the number, about five years back?

Gandharv Tongia — Chief Financial Officer

My sense is that number would be around 70% or around 70% of B2B and 30% of B2C around five, seven years.

Sonali Salgaonkar — Jefferies — Analyst

Got it. Sir, Sir. And on industry basis, what is the kind of, channel inventories that we are looking at the — are they at optimum levels or lower? My question is, from the point of your volatile copper prices.

Gandharv Tongia — Chief Financial Officer

If I cover FY ’22 I think these were at acceptable level. But since 1st April, we have witnessed a fair amount of correction in both as well as copper upgrade copper as well as in aluminum inventory level, sorry, copper, aluminum price levels. In such a situation. What we have seen is generally dealers and distributors would like to the reviews, the inventory level, so that they don’t lose on the margins. If the prices of what exactly that is where they build higher inventory level. So small amount of correction is possible in channel inventory, but I don’t expect that will be very material.

Sonali Salgaonkar — Jefferies — Analyst

Got it. Sir. And what about FMEG inventory?

Gandharv Tongia — Chief Financial Officer

I think it is an acceptable level.

Sonali Salgaonkar — Jefferies — Analyst

Okay. Normal levels. Then lastly, any guidance you would like to share for the near term in terms of either the revenue or the margins, please.

Gandharv Tongia — Chief Financial Officer

Sure. As I was mentioning to Ravi, as well as Naval that as part of Project Leap. We want to touch INR20,000 crore rupees of top line by fiscal ’26 and we embarked on this program last year in FY ’21 when we did INR9,000 crore rupees of top line rounded off this year we have INR12,000 crore so directionally we are on set to achieve good INR20,000 crore of top line. As far as our performance on top line is concerned on the margins on cable and wire will continue to hover between 11% to 13% and we would like to improvise as we go along. Then the current label which is hoping to head on 12%. On FMEG, we expect to get to 12% by FY ’26.

Sonali Salgaonkar — Jefferies — Analyst

Got it. Sir. Very helpful, thank you and all the best.

Gandharv Tongia — Chief Financial Officer

Thank you very much.

Operator

Thank you. Ladies and gentlemen, in order to ensure that the management able to address questions from all participants, please limit, your question to two per participant. If you have a follow-up question you may rejoin the queue.

The next question is from the line of Renu Baid from IIFL. Please go ahead.

Renu Baid — India Infoline — Analyst

Yeah, good afternoon and congratulations for good results. My top two questions here. First is on the now FMEG portfolio as you’ve mentioned as in the business has been looking at multi-brand strategy positioning in the premium mass premium and also launching the for the economy segment. So as a company in the next 18 months given that there is an inflationary headwind could be risk of down-trading how should one look at where it would be the incremental focus be in the near term. And are you seeing any potential headwinds in terms of demand softness because of inflationary impact on near-term softness in the real estate market to that extent? That’s the first question.

Gandharv Tongia — Chief Financial Officer

Sure, great question, Renu. I have Chintan also on the call with our Head Investor Relations, so I request him to participate in the call, so Chintan will you take this one?

Chintan Jajal — Head of Investor Relations

Hey, hi, Renu. So I think. I think our strategy in FMEG is really to cover all the price points. So what we aim to do is travel across all the price pyramid across price spectrums. So if you remember in our portfolio is largely focused more on the mid premium space and eventually over the last few years. What we’ve tried to do is increase the share of premium products. So say for example in various categories, if I picked up fans, for example, the share of premium is increasing, even in lights, the share of the premium panel’s etc. is increasing. Overall in consumer business I think the premiumization percentage has improved.

Now what we are trying to do is we are even trying to get into the economy price points or maybe some economy price points. So we are working on our entire brand architecture just to be ensure that there is minimal cannibalization and we spread our brand presence through effective brand communication, so we recently launched a new sub-brand, Etira, which will play at these lower price points. Currently we’ve launched it in wires. We also aim to extend it throughout our portfolio and I think this will really help us develop our presence and resonate better with consumer needs and wants. And especially when we are trying to get into say alternate channels as well as geographies like semi-urban and rural, I think here you need the right product portfolio to really drive that penetration and that’s where these this brand as well as our, all of our portfolio initiatives will help.

Renu Baid — India Infoline — Analyst

Sure, on my second question is on the cables part of the business. Where the company has been consciously trying to work on some of the specialized cables and applications to improve the portfolio. Also, if you can share some updates on this side and on the average INR300 crore to INR350 crores capex which we’ve mentioned. How should we look at of the incremental spending across the various sub segments in categories into the company?

Gandharv Tongia — Chief Financial Officer

Sure. So the first one. We are first the only company the entire country or probably in the continent, which can supply all types of cables and wires, we have only one space, we have, we don’t have any good presence which is EHV and we are trying internally to figure that out or we can offer products there. And this year we have been able to get to new by example automobile railways and all of these product categories that niche with good margin and require fair amount of product innovation. On the capex out of own typical of broadly, two-third will go to cable and wire and one-third for FMEG. Within that two-third most of it will go for for setting new facilities to meet the export requirements as well as for the product categories we have the utilization is fairly high. A part of it will go for maintenance and the balance for backward integration. On FMEG we will invest in in product categories where we don’t have in-house manufacturing for example purchase, and we’ve set up facilities where the utilization are fairly high.

Renu Baid — India Infoline — Analyst

Got it. Thank you and I’ll get back for question. Thank you.

Gandharv Tongia — Chief Financial Officer

Sure. Thank you very much.

Operator

Thank you. The next question is from the line of Rahul Agarwal from InCred Capital. Please go ahead.

Rahul Agarwal — InCred Capital Financial Services Private Limited — Analyst

Hi, thank you and congratulations on the performance given the challenges just three quick questions, Gandharv. One is on the cash usage. I think I’m sure that the senior leadership, looking at that number and the cash flows are increasing year-on-year. We already have INR1100 crores, I think you will have another it too. INR10 billion rupees next year as well given what growth, we’re talking about, you get that will spend do you look at new categories to get into or some kind of M&A, could you throw some more color on this? That’s the first question. Secondly on the anything on the FMEG, EBIT margins is still tracking pretty low for the year as well as for the quarter, anything you’d like to state for fiscal ’23, and third is on the significant reduction. I can see, on inventory debtors and greater across though the net working capital is a same Y-o-Y, what is really happening here, I’m sure BCG is working very hard here and this was a very high priority area for us. Please put light there as well. Thank you so much.

Gandharv Tongia — Chief Financial Officer

On MND, when we embarked on this Project Leap, we feel that we have to do several take. But what we have said it has been split the entire project into 24 workstreams and then we picked up few workstreams at year one priority and then few workstreams for the year two priority and so on. M&A and given we should at each different product category we decided there will take those up in the, in the year and as we embark on the second year of Project, I explained by September quarter we should be able to give you additional color what we should be doing but you are absolutely right that business that would is generating fair amount of cash and it’s better to use that care to meet the growth ambition for the company can buy that means improve the shareholder on FMEG margins this quarter.

Of course, there was some pressure of inflation, but at the same time we got into this realignment, because you know what quarter INR2,000 crore rupees will not necessarily will take us to get to stay a number,say INR550 crore, that we have to change the strategy and this is what we did, we ensured that we have right leaders in place, we have hired for example French leaders from one of the peer company, suppose we have hired another veteran from Panasonic, who was invited as MD of Panasonic to lead our FMEG or B2C business, so we have done fair amount of investment, both on the process on a regular side as well as on the year on the capability side and which is getting reflected in this year’s margin. But as I mentioned, a while back, we are confident on 12% EBIT margin and maybe give by fiscal ’23.

And this year we should be but further improve on the margin levels. Third is the working capital, your observation is absolutely correct. It is our focus area and will remain a focus area on if you split the working capital in two broad categories. One is receivables and second is inventories. On the receivables we have been able to further improve our channel financing penetration, cable and wire give and take 2 percentage points we will be around 70% of channel financing and FMEG we have almost touched the 15% which is helping us in reducing our receivable number of days and these and these facilities are with LED core. On the inventories, we have been able to optimize, not the game is to balance we have the availability so, there you are able to meet the requirement of the customer and optimize inventory.

We will continue to work on this and that is where of course BCG is saying but the leaders we have hired recently, they’re also spearheading these initiatives, to give example we hire someone and Head of Logistics, almost 18 months back, Vipul Aggarwal from another company and he is doing a fantastic job on optimizing the inventory levels and improving over is the time to the end customer.

Rahul Agarwal — InCred Capital Financial Services Private Limited — Analyst

So, this is a base right, and that continues going forward, right?

Gandharv Tongia — Chief Financial Officer

On I think…

Rahul Agarwal — InCred Capital Financial Services Private Limited — Analyst

On working capital, yeah…

Gandharv Tongia — Chief Financial Officer

Sorry, I missed that. May I request you to please just repeat?

Rahul Agarwal — InCred Capital Financial Services Private Limited — Analyst

On net working capital, is this the base going forward. I mean you will just improve from here. Right?

Gandharv Tongia — Chief Financial Officer

Yes, yes. Absolutely, absolutely.

Rahul Agarwal — InCred Capital Financial Services Private Limited — Analyst

Okay and just last, you answered the question partly paying fiscal ’23 capex where do you want to spend, could you help me understand where did you spend the — just broad areas, where do you spend?

Gandharv Tongia — Chief Financial Officer

Sure. I’ll split this in two parts. I Around two-third will go for our regular cable and wire and one-third for FMEG. On two-third part of it, most of it will go for building capabilities and capacities for exports market and for the product categories we have our utilization of very high and we need to put an additional facilities that is one portion of that two-third. The second one is on backward integration and third is maintenance capex. On the remaining one-third in FMEG most of it will go for additional capacity, which we need to build. For example, such as we don’t have in-house factories so we will set up that. Therefore two product category is there, our utilization is fairly high would have good capacity is there and a part of it will also go for preventive capex.

Rahul Agarwal — InCred Capital Financial Services Private Limited — Analyst

Thank you so much. Best wishes for fiscal ’23. Thanks.

Gandharv Tongia — Chief Financial Officer

Thank you so much.

Operator

Thank you. The next question is from the line of Atul Tiwari from Citi. Please go ahead.

Atul Tiwari — Citigroup Inc. — Analyst

Yes, thanks a lot and congrats on very good set of number. I think just one question, on how much would be the broad price hike taken over say, past 12 months across cable and wire. And as a result of the size, high, are you seeing any sign of either demand slowdown or downgrading in any part of the portfolio?

Gandharv Tongia — Chief Financial Officer

On cable in my head. The fourth quarter, we would have taken a price hike of which single-digit and the inflation, also in the similar range. Progressively, we have been able to improve our EBITDA if you remember. In the first half we faced bit of challenge on the maintaining contribution as well command and but after that things have improved. Third quarter was comparably better than the first half and the fourth quarter was better than the third quarter on FMEG also is a mixed batch there was a bit of pressure on contribution margin in the first half of the year. But after that we had been able to take price hikes there as well.

Atul Tiwari — Citigroup Inc. — Analyst

So, any sign of demand slowdown — slowdown or downtrending by customer in any of the portfolio as of now?

Gandharv Tongia — Chief Financial Officer

No, no, this comes bit off in place really challenges in the private categories, but it is not broad based. in fact, if you are available, if product is meeting the specification and requirements of the costumers, practically the launches them into demand.

Atul Tiwari — Citigroup Inc. — Analyst

So again, thanks, thanks a lot.

Operator

Thank you. The next question is from the line of Achal Lohade from JM Financial. Please go ahead.

Achal Lohade — JM Financial Ltd. — Analyst

Yeah, good afternoon. Thank you for the opportunity. My first question was, you — in one of the answers you mentioned that 25% is the price increase and about balance is the volume increase in both FMEG as well as cables and wires business have I understood it right?

Gandharv Tongia — Chief Financial Officer

Partially is other way around.

Achal Lohade — JM Financial Ltd. — Analyst

So, you’re saying 25% is the volume growth and 15% is the price increase in both the segments?

Gandharv Tongia — Chief Financial Officer

With out of the total increase, 25% is because of volume and the balance 75% is because of value.

Achal Lohade — JM Financial Ltd. — Analyst

Okay. Okay. Number two, is it possible, like you mentioned in terms of volumes for FY ’22 and I presume FY ’21 was kind of a low base. If we were to look at in terms of volume CAGER for last five years. Would it be possible to put a number, would that be mid single-digit, high single-digit or mid teens any number ballpark number?

Gandharv Tongia — Chief Financial Officer

It would be fairly incorrect for me to get that number to you. I don’t have that handy but I can give you a color on this. My sense is our number would be significantly better that the industry numbers for the…

Achal Lohade — JM Financial Ltd. — Analyst

Of course, of course.

Gandharv Tongia — Chief Financial Officer

For thee secure cut last three years, last five years.

Achal Lohade — JM Financial Ltd. — Analyst

Yes, yes. That part I completely agree, what I just wanted to check, is the aggregate growth, volume growth and the second question I had in mind is in terms of the pricing for cables and wires, specifically in terms of pricing, our product, is it the margin percentage margin or it is rupees per unit may be for meter per kg anything if you can give some color?

Gandharv Tongia — Chief Financial Officer

It’s percentage margin.

Achal Lohade — JM Financial Ltd. — Analyst

It’s a percentage margin. Okay. So, which brings me to the next question if copper prices and aluminum prices were to normalize to earlier averages. How would that impact in terms of either volume in the margin. As this is a hypothetical question, but just color your perspective on the same would help.

Gandharv Tongia — Chief Financial Officer

So as I mentioned is percentage margins. So, irrespective of the fact whether top line goes up or down because of increase or decrease cost, we would be able to maintain the margin. Historically in cable and wire got a between 11% to 13% and we should be able to maintain that.

Achal Lohade — JM Financial Ltd. — Analyst

Got it, got it. This is very helpful, thank you so much. And all the best.

Gandharv Tongia — Chief Financial Officer

Thank you very much.

Operator

Thank you. The next question is from the line of Chetan Gindodia from AlfAccurate. Please go ahead.

Chetan Gindodia — AlfAccurate Advisors — Analyst

Hi Gandharv and congratulations for the great set of numbers. Just two questions, firstly, you said that the volume growth is 25% of the growth of this year to 40% was the revenue growth for wires and cable, so kind of in place 10% volume growth. This seems kind of undervaluing considering in or the major building material players think in players are seeing 20% volume growth for this year given the real estate buoyancy. So, I just wanted to understand why has been the volume growth low and any reason for this. Or do you expect this to improve going from here?

Gandharv Tongia — Chief Financial Officer

So volume growth cannot be directly linked with the real estate. Our products are introduced at the different pieces of the consumption and that is where it’s not goodwill comparison as far as future is concerned, as I mentioned, a while back to one of the participant that we inching towards INR20,000 crore of top line may affect FY ’26 and we will continue to outpace industry growth.

Chetan Gindodia — AlfAccurate Advisors — Analyst

Okay. Okay. And just lastly, wanted to understand on the payable days. So, we — So whatever gains we have achieved from a reduction in inventory days and receivable days we have kind of given that away by decline in payable days. So in a, what has really led to the decline in payable days because because of this or ROC is not improving, so just wanted to understand what has led to the movement in payables days?

Gandharv Tongia — Chief Financial Officer

Yeah, I think I did of the they can you know we import copper, copper is the most significant raw material a pickup about our cable and wire business and we import copper from overseas market. In the, in the last year in the fiscal ’22. During the course of the year we that because of logistical challenges, we should have alternate options and available in the form of domestic supply and in the domestic market. Generally speaking, it is on a cash and carry business.

So you get supplied by making advance payments as against the import now where you get FC which could range between 90 days, 180 days and which is what we have done in the current year, which has impacted the payable days. Having said that I don’t think that that will continue in future in the similar proportion, of course, we would continue to have some supply from domestic market, but in the form of cash within see we should be able to get FC option from both the suppliers domestic as well as in import and we should be able to go back to our regular payable day, once we get to the some arrangement with the international suppliers as well as the domestic suppliers.

Chetan Gindodia — AlfAccurate Advisors — Analyst

Okay, got it, Gandharv. And all the best to your team.

Gandharv Tongia — Chief Financial Officer

Thank you very much.

Operator

Thank you. The next question is from the line of Nitin Arora from Axis Mutual Fund. Please go ahead.

Nitin Arora — Axis Mutual Fund — Analyst

Hi, Gandharv. Thank you for taking my question. My first question is on the FMCE when we look at the last five to six quarters pretty much stuck in the top line of INR340 crores to INR350 crores on an average. when I look at your annualized number being industry saw last year, a huge pent-up our growth is just about 21% and I’m assuming there must not be any, let’s say, a very less volume growth in that, to be honest so you started saying that volume growth is in the double-digit even in FMEG. So that’s not adding up given what other consumer companies are seeing minimum category price I guess in the range of 15% to 16% on an annualized basis.

So, what’s going very wrong there in FMEG, are the products what we have launched are not able to scale up if you can throw some light on that, because I’m not comparing you with the other players, you’re so small in the industry because growth should look to be higher and that’s also not happening even if you look at the Q4 numbers. So that’s my first question, if you could throw some light on that.

Gandharv Tongia — Chief Financial Officer

Yeah, said your observation is correct. Our business underpinned realignment exercise to improve sales at cables as well as to achieve distribution synergies which has hampered temporarily low growth. We have also identified the need to change the overall operation model because what quarter INR2,000 crore rupees will not necessarily take us to say just the number INR5,000 crore and we also had fair amount of change at the leadership level and our B2C business, but at the same time I must acknowledge is moving for the next quarters and work and it in the current year, we should be able to bounce back if I want to give you any additional color for example because of switches. We had some supply-side issues because of the though we have taken the correct direction in the form of setting up a new facility, it has impacted our top line and bottom line performance for the year gone by.

So it’s a mix of everyone. We have our action plan in place. A part of it has already been implemented in the form of new leadership in the form of product innovation to give example we launched BLDC fan, which can be operated with the help of remote, Chintan, a while back talked about Etira brand which has been launched. So the corrective should. I think we should be able to bounce back and as I mentioned, a while back, we are confident to achieve INR20,000 crore rupees of top line including for FMEG and retail and a 12% EBITDA margin by fiscal ’23.

Nitin Arora — Axis Mutual Fund — Analyst

And secondly just on cable and wire do you talked about in the starting I think everyone’s got confused that there is a 25% volume growth, but I think you clarify, saying that the 10% volume growth 25% of the overall revenue is the volume growth. So the 10% volume growth, can you attribute some segments where it has come from because despite so much the commentary is being spoken about there is a phenomenal growth across industry capacity utilization of private industries are so high. The volume growth is still about 10%. So it will be helpful to understand where they actually the growth is coming from and how you looking this volume growth at least 10% growth even for FY ’23 is that the base number you’re working with on the volume side, that’s my last question. Thank you.

Gandharv Tongia — Chief Financial Officer

Yeah. So here to answer on this 10% type growth 25% total increase top line. It is got based project based debt if I were to give you a flavor of cable and by ahead, it could range between 35% of people 40%, 45% across all geographies. For example, in the case of we witness, a growth of almost a few percentage, the market and in the case of flexible on FMEG cables be registered of growth of almost another market. But to give a broad picture across product category and region as future is concerned, I would probably take you back to our ambition of INR20,000 crore the piece of top line by fiscal ’26 and we are committed to maintain the momentum and improve for the rest as we go along.

Nitin Arora — Axis Mutual Fund — Analyst

Thank you so much.

Operator

Thank you. Your next question is from the line of Aniruddha Joshi from ICICI. [Technical Issues]

Aniruddha Joshi — ICICI Securities — Analyst

Yeah. Thanks for the opportunity. So on the Etira brand. Basically, if we see most of the durable companies, the operator with one brand only concerning limited surplus for a brand-building activities and all the economy mid-price or even the premium are introduce with the same brand itself. So why we have gone ahead with the, basically a new brand Etira itself at the go end of the market. So, and also will Polycab and Etira brands will both operate in the same markets. Then there is a risk of cannibalization or will they operate in completely different geographies. So what is the plan on Etira brand? Yeah, that is the question. Okay.

[Technical Issues]

Gandharv Tongia — Chief Financial Officer

To conduct the brand study for us. We are also working or will be on our marketing side of it there. The agencies for marketing and then we went. We, the product portfolio optimization in wholesale, we there in few of the product segments. We don’t have that level at the right price point all and like all the price points that is we sort of Etira. Etira is slightly different product with slightly different product specification to meet the requirements of the customers who are cost conscious without compromising of course on quality and with a focus on different geographies. So Etira would probably cater the requirement for emerging India on government led which are required to be made by the dealers and distributors, we as not necessarily, they want to spend more money, and at the same time, they don’t have higher expectation in terms of quality. So for example on the Green Wires, we have better specification but it’s slightly more costly, which is can be said is that like a premium barite of the regular retail wires whereas Etira is on the economy range or just economy range product.

Operator

Thank you. Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to Mr. Gandharv Tongia for closing comments.

Gandharv Tongia — Chief Financial Officer

Okay, thank you everyone for taking out time and with this call we will be happy to attending this call. we would be happy to attend your questions you can always details to the reach out to me or Chintan or you can write to us at investorrelations@polycab.com. Thank you for your confidence in us, take care. Bye-bye.

Operator

[Operator Closing Remarks]