Polycab India Limited Q4 FY22 Earnings Conference Call Insights

Key highlights from Polycab India Limited (POLYCAB) Q4 FY22 Earnings Concall

Management Update:

• POLYCAB stated its overall top-line surpassed INR120 billion clocking 17% CAGAR in the last 5 years. And export is inching towards becoming a sustainable INR10 billion business.

• POLYCAB invested about INR2 billion to acquire around 55,000 square feet of office space in Mumbai, very close to the company’s existing head office. POLYCAB added that a part of this cost will be compensated by monetization of existing office in Mahim.

Q&A Highlights:

• Naval Seth from Emkay Global asked about the value and volume mix for 4Q and FY22 for cable and wires and FMEG. Gandharv Tongia CFO answered that on cable and wire, around 25% of the total growth can be attributed to volume and balance for value. In FMEG it will vary from category to category, but it would have similar trend there as well.

• Naval Seth from Emkay Global enquired about capex spend for FY23. Gandharv Tongia CFO replied that historically POLYCAB has incurred around INR300-350 crore every year. Exception was last year where it incurred INR300 crore for regular capex and INR200 crore for a new office. So around INR300-350 crore is what POLYCAB is looking for FY23.

• Ravi Swaminathan from Spark Capital enquired about the breakup of the wires and cables business in terms of ratio of how much is cable and how much is wire. Gandharv Tongia CFO said cable broadly is in early 50s and the balance is wires. In total basis, of the entire INR12,000 core piece of top line, around 58-60% would be B2B and around 40% would be B2C.

• Ravi Swaminathan from Spark Capital asked if there is any difference in strategy between the growth in cables and wires. Gandharv Tongia CFO said wires are more profitable because of B2C product whereas traditional cable are B2B where the profit margins are comparatively lesser than wires. The objective is to get to number one position in all the product categories and expand the presence.

• Ravi Swaminathan from Spark Capital also asked about the volume growth expectation over the next 1-2 years in wires and cable segment. Gandharv Tongia CFO replied POLYCAB can’t give a specific number but it’s safe to assume that POLYCAB is going to grow significantly higher than the industry growth.

• Ravi Swaminathan from Spark Capital queried about the revenue breakup of FMEG business in terms of fans, lighting, pumps, etc. Gandharv Tongia CFO answered that fan would be around one-third of top line of FMEG and switches and fits around 15%, light and lum around 15% and then other small business categories.

• Sonali Salgaonkar from Jefferies asked about the quantum of price hike in 4Q. Gandharv Tongia CFO answered that in 4Q POLYCAB witnessed inflation in mid single-digit and price hikes were in similar range. So POLYCAB has been able to pass almost all the input cost increases to end customer in 4Q.

• Sonali Salgaonkar from Jefferies also asked about the 1Q price hikes. Gandharv Tongia CFO answered that from FY23, the company would try to recalibrate prices on a monthly basis, after factoring two data points; changing the commodity prices and change in USD INR exchange rate. The intention is to maintain the traditional cable and wire margins of 11-13%.

• Sonali Salgaonkar from Jefferies India asked about any near term guidance in terms of revenue or margins. Gandharv Tongia CFO replied that as part of Project Leap, POLYCAB wants to touch INR20,000 crore of top line by FY26. On margins in cable and wire, would like to hover between 11-13% and FMEG 12% by FY26.

• Atul Tiwari from Citi asked if there has been any demand slowdown due to price hikes. Gandharv Tongia CFO replied that there’s been some bit of inflationary challenges in few of the product categories, but it is not broad based.