Polycab India Ltd (NSE:POLYCAB) Q4 FY21 earnings concall dated Jun. 07, 2021.
Corporate Participants:
Gandharv Tongia — Chief Financial Officer
Inder T. Jaisinghani — Chairman and Managing Director
Analysts:
Ravi Swaminathan — Spark Capital — Analyst
Vikas Mistri — Moonford Ventures — Analyst
Pritesh Chheda — Lucky Investment Managers — Analyst
Rahul Agarwal — InCred Capital — Analyst
Aditya Bagul — Axis Capital — Analyst
Yellapu Santosh — Asian Market Securities — Analyst
Chetan Gindodia — AlfAccurate Advisors — Analyst
Manoj Gori — Equirus Securities — Analyst
Sanjaya Satapathy — AMPERSAND — Analyst
Rajesh Kothari — AlfAccurate Advisors — Analyst
Presentation:
Operator
Ladies and gentlemen good day and welcome to Polycab India Q4 FY ’21 Earnings Conference Call. As a reminder all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions].
We would like to remind you that certain statements made by the management in today’s presentation may be forward-looking statements. These forward-looking statements reflect management’s best judgment and analysis as of today. Actual results may differ materially from current expectations based on the number of factors affecting the business. Please refer to Safe Harbor disclosure in the presentation. Please note that this conference is being recorded.
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 and a very good afternoon everyone. I hope you all are staying healthy and safe. I am Gandharv Tongia, CFO at Polycab India Limited. We are very happy to have you on the call today to discuss our Q4 fiscal 2021 business performance. I know this call had been long overdue. Thank you for being considerate. Unfortunately the night after our Board meeting on 13th of last month, I started off with a few common COVID symptoms, which aggravated the next morning. So as a precautionary step, we decided to postpone the call. However, I’m fortunate to have recovered well, and feeling much better now.
Moving on please note, during the call, we will be referring to the presentation, financial results and financial statement, which are available on the stock exchanges as well as Investor Relations web page of our website. It can also be downloaded through the link or QR code on slide 10 of our earnings presentation. From our management team, we have with us our Chairman and the Managing Director, Inder Jaisinghani. Let me now hand it over to Inderbhai for his comments.
Inder T. Jaisinghani — Chairman and Managing Director
Good afternoon everybody. Welcome to [Technical Issues]. FY ’21 has been a…
Operator
Sorry to interrupt, sir. But your voice is bit feeble. If we can come a bit closer?
Inder T. Jaisinghani — Chairman and Managing Director
Okay. Good afternoon everyone, welcome to all. FY ’21 has been extraordinary year marked by disruption, resilience, compression and the transformation. Our endeavor to ensure safety at Polycab has held the society at large remains untethered. Concurrently, we also ensured uninterrupted operation to the agility and technologies, which helped us leverage the favorable market trends and report robust business performance in the fourth quarter. We are excited to commence a journey towards our five year vision, which will shift our brand positioning, operations and business growth along with the strong emphasis on the governance and sustainability.
Considering our ongoing transformation initiatives, I believe, we all are well placed to take a leap and create long-term value for everyone connected to Polycab. I now request Gandharv to take you through our earning presentation.
Gandharv Tongia — Chief Financial Officer
Thank you very much Inderbhai. Overall, we had strong Q4 with healthy market share gains. The underlying business performance was fairly good across the board. The domestic demand trends remain supportive. Pandemic related disruption across all facets of the economy was relatively minimal in Q4. As a result, infrastructure and construction activities picked up in full swing. Central and state government, as well as private project activity showed an uptick. Private sector investments have been evidently higher in the second half.
Consumer sentiments improved under unlocking and vaccination rate, leading to buyout demand for B2C products. We continue to remain cautious and agile in the face of ongoing second wave of COVID-19. While the severity of it is high, I believe we as a country are much better placed than last year, given increased safety awareness and fast paced vaccine rollouts. Even as a company, we are well footed from an operational standpoint. Hence, we don’t foresee any significant disruption. Our teams continue to perform at a very high level, while adopting a nimble approach to seize all opportunities, regardless of business environment.
Moving on to presentation on slide 4, for the quarter ended March 31, 2021, our consolidated revenue at INR30.3 billion grew by 43% year-on-year. Performance has been quite strong, even if we normalize it for the impact of pandemic. B2C portfolio continued to outpace [Phonetic] B2B, thereby increasing its overall contribution.
EBITDA grew by 43% year-on-year, resulting in 13.9% margin, led by pricing actions, leverage benefit cost saving initiative, offsetting sharp input cost inflation. Our staff cost at INR997 million was higher versus last year. Polycab had ensured employees are well rewarded for the effort and commitment, especially during such challenging times. Accordingly, hikes, promotions and variable pay were rolled out for FY ’21.
Moving on, A&P spend at INR144 million or 0.5% of sales was lower versus last year, as we reorganized our marketing strategy to better serve the business objectives. Hence, we can take this quarter as an aberration. Our annual increased spend are likely to be in the tune of rupees INR1.5 billion to INR2 billion for fiscal 2022. Finance cost was broadly stable, while other income was lower on a year-on-year basis to higher mark-to-market gains in base quarter. A detailed breakup of our other income and finance costs have been provided on slide 13 of our earning presentation.
Our profit before tax at INR3.8 billion and profit after tax at INR2.8 billion increased by 36% year-on-year and 32% year-on-year respectively. On slide 5 for the fiscal year 2021, I am delighted to highlight that we surpassed last year despite the dismal start to the year. Our revenue grew on a year-on-year basis with B2C contribution rising by over 75o bps from 32.6% in fiscal ’20 to over 40.2% in fiscal ’21 on a standalone basis. Adjusting for a large export order, it would have been increased further.
EBITDA margin was relatively stable, which again [Technical Issues]…
Operator
Requesting all the participants to please stay connected, we lost the line for the management.
Ladies and gentlemen, thank you for patiently waiting. We have the line for the management reconnected. Thank you and over to you sir.
Gandharv Tongia
Sincere apologies participants. There were some technical issues in the line. Let me just go back to slide 5, which I was trying to explain and then let’s continue from there. So if we go to slide 5 for the fiscal year 2021, I am delighted to highlight that we surpassed last year despite a dismal start to the year. Our revenue grew on a year-on-year basis, with B2C contribution rising by over 750 bps from 32.6% in fiscal ’20 to about 40.2% in fiscal ’21, on a standalone basis. Adjusting for a large export order, it would have increased further. EBITDA margin was relatively stable, which again is a decent achievement I would say, considering the adverse leverage and sharp rise in input costs seen during the year. PAT grew 16% year-on-year, partly led by few one-off gains in Q1 as highlighted on slide 10.
Moving on to segment on slide 6; Wires and Cable business clocked a healthy growth of 35% year-on-year, led by pickup in construction activity, higher realization, increased distribution reach and portfolio enhancement. On the domestic side, institutional business outperformed distribution business during the quarter. However, this was on the back of a soft base, and hence it may be a bit early to call out full recovery. Having said that, the business certainly continued to gain traction on a sequential basis. Exports portfolio, excluding the large order, declined by 7% year-on-year, mainly on account of stalling of a few large projects, on account of pandemic. However, we continue to build presence in many key geographies through appointment of distributors, and expanding product offerings. We believe the business will get back to growth trajectory soon.
For the year as a whole, our domestic market assessments suggest, we would have gained at least 200 bps of market share in fiscal ’21. However, we await the market and industry data as of now. On the profitability side, segment EBIT margin at 13.4% was broadly stable versus previous quarter. This was supported by pricing actions to offset the double-digit inflation seen in our raw material basket.
Moving to slide 7, FMEG posted an impressive 89% year-on-year growth in Q4 on the back of strong execution all category, as well as regions, witnessed strong growth with market share gains. Consumer demand remained healthy on account of returning normalcy. FMEG contribution to overall sales increased over 290 bps year-on-year to 11.4%. During the quarter, fans posted healthy growth, despite stiff competition and cost push. Lighting products business nearly doubled, led by better demand and supply alignment. Switches and switchgears grew 2.5x, while other categories also witnessed strong offtake. Profitability continued to move in an upward trajectory, despite input cost inflation, helped by pricing intervention, premiumization, better working capital management and cost optimization.
Segmental EBIT margin stood at 7% in Q4 and 5.5% for fiscal ’21. While the ongoing phase of intermittent lockdown do pose a challenge, we are well placed from a supply perspective to cater demand across the nation. We have also observed some resilience in retail channels, as the retailers are now delivering directly at home. While this may not be meaningful, it does offer some optimism and showcase resilience of Indian trade.
On slide 8, Other segment, which is largely our strategic EPC business, witnessed a decline on — of severe impact of pandemic and higher base of last year. The copper segment, as disclosed in the financial results, largely reflect Ryker, which is a part of our backward integration initiatives.
Moving on to financials from slide 10 onwards, our balance sheet grew stronger, with over INR9 billion of net cash position as of March 2021, which is a 5.5x of same period last year. ROCE and ROE in Q4 stood at 32% and 24% respectively. Working capital looks optically stable on a YoY basis. However, there has been decent underlying improvement. The numbers should be correlated to the fact that the prices of key imports like copper, aluminum have nearly increased. As a matter of fact, copper has doubled over last year, and this inflation reflects in mark-to-mark inventory as of 31st of March, 2021.
Besides financials, during the year, we have made tremendous progress on expanding our distribution and influencer ecosystem. Our authorized dealers and distributors count as of March 2021 grew by about 17% year-on-year to over 4,100. Our retail outlet reach increased by about 32% year-on-year to over 165,000 in [Indecipherable], while our influencer program grew by about 33% year-on-year to over 180,000.
We now have seven knowledge and experienced centers across several large cities across India. Furthermore, we are also now redefining our retail marketing approach through different outlets formats. First is Polycab Gradient, which we also call it as knowledge centers. These are large showrooms with virtual reality showcase, as well as audio visual facilities. They also serve as training hubs for influencers and as sales back office for our employees.
Second is Polycab Arena; these include experienced centers, as well as Polycab exclusive retail outlets. And the third format is Polycab Shopee, which is a shop-in-shop model, where we design the exclusive earmarked space granted by the retailer. We believe this concept will help us provide a better demand, experience — better brand experience to millions of customers and influencers.
Under Project Shikhar, our sales acceleration program, we have also launched the experts program, which is our robust 360 degree influencer management initiative for promoting inclusive growth. The electrician and retailer enrolled in this program are provided loyalty based monetary incentive, in conjunction with training in their respective field by industry experts. Whilst training, they are certified as expert by Polycab. The certifications will be provided through government recognized institutes. The aim is to have them build soft skills like people, social, communication skill and time management, along with professional knowledge. Leveraging on this program, we will also be piloting bulk or basket offering soon, a glimpse of our new product, the Polycab Galleria opened in Cochin is on slide 14.
We have some exciting stuff on the next few slides. It gives a foretaste of our five-year vision project, which we have titled it as Project Leap. This year, marks the 25th anniversary of Polycab as a structured entity. Since 1998, we have recorded a robust 43% compounded annual growth rate in business. Even in the last five years, the growth has been relatively healthy at about 11% CAGR, while maintaining market leadership and tackling challenges like the pandemic. By diversifying our portfolio, building robust manufacturing capability, creating a strong IT backbone and strengthening our brand positioning, we have created a very functional platform, which has the potential to unlock significant amount of [Indecipherable] growth. Now is the time to leverage these competencies to the fullest and challenge ourselves to realize our future vision for the company over the next five years.
Accordingly, we have embarked on a multi-year transformational journey, with an aim to cross INR200 billion in sales by fiscal ’26. We can’t possibly think business without thinking of the environment, social development and good governance, and hence we are also aimed to significantly up the pedal on our sustainability agenda as well.
Now, let us come — how do we formulate our directions towards this vision. For this, we believe simplicity is excellence. We have essentially created four core areas, that is B2B, B2C, capability and sustainability. I will probably touch each one of these briefly over the next few slides.
Slide 16, on the left, we have highlighted few broad targets, while on the right, we have key work streams to achieve that targets. On the B2B side, we want to reenergize the business and extend our leadership position. This will be done by refining our business model, to build in large towns, announce value proposition to explore untapped opportunities, enable demand generation through micro market analytics and have a strong business development hub.
On slide 17, for B2C business, we wish to achieve breakout growth and position ourselves to win in these categories. We want to make our products an integral part of consumers’ day-to-day life. We aim to build a comprehensive portfolio across price points, redefining our brand architecture, adopt digital-first approach and explore adjacencies.
Slide 18 highlights three core growth enablers, which will guide us through the journey. We will build an operating model, which fosters performance, innovation and customers-first driven culture with increased autonomy and accountability. We plan to take our IT capabilities to the next level, by having digital and analytics driven decision making across all facets of business.
Slide 19, lastly but most importantly, we believe our progress will be analogous to our sustainability initiatives. While we have made wonderful progress in terms of reducing environmental impact and promoting inclusive growth. We believe there is lot of work which can be done in the areas of renewable energy, optimizing uses of energy, water and other resources, recycling of waste and water, and further augmenting social development contribution.
We have already taken baby steps by appointing an environment consultant, who will help us with our green initiative. Our Polycab Social Welfare Foundation will help us drive significant and focused CSR initiatives. We have also embarked on an integrated reporting journey starting fiscal ’21, which we hope will meaningfully increase transparency and form a base for good governance. Environment, sustainability and governance focus will be ingrained further into core business, and we aim to achieve leading ESG score in Indian corporate space. In the coming period, we will also develop long-term ESG targets.
Now — next, there are couple of updates which I would like to share with you. Firstly, considering the healthy financial position, the board has recommended for payment of final dividend of INR10 per equity share for the year ended 31st March, 2021, subject to the approval of the shareholders. Our dividend payout ratio on share profit will sequentially improve to 18% in fiscal ’21.
Second, there has been some reorganization in the Board of Directors. On the Executive Director side, Mr. Ajay Jaisinghani, Mr. Ramesh Jaisinghani, and Mr. Shyam Lal Bajaj have stepped down from the Board, and Mr. Bharat Jaisinghani and Mr. Nikhil Jaisinghani and Mr. Rakesh Talati have been appointed as Executive Director subject to approval of the member at the ensuing Annual General Meeting of the company. This change was a part of our larger succession planning. Bharat and Nikhil have been working in different areas of sales, marketing, production, IT and others for nearly 15 years now, and both have played instrumental roles in driving several important projects within the company.
On the Independent Director side, we had two changes. Firstly, Ms. Hiroo Mirchandani had resigned from the post of Independent Director with effect from May 12, 2021, in order to rebalance our board portfolio, in line with her professional and personal goals. We really admire the guidance and knowledge she provided, which helped the company grow. We wish her good luck for her future endeavors.
For the second change, I’m very pleased to announce Mrs. Sutapa Banerjee has joined the Board as an Independent Director with effect from May 13, 2021. Mrs. Banerjee comes with over 30 years of professional experience, heading many large financial services companies. Mrs. Banerjee is a gold medalist in Economics and Advanced Leadership Fellow at Harvard University, and visiting faculty with IIM, Ahmedabad. Mrs. Banerjee is also an adjunct faculty with IIM, with Indian Institute of Corporate Affairs, the Government of India’s thinktank, under the Ministry of Corporate Affairs. With this appointment, she adds Polycab to the list of esteemed companies, like Godrej Properties, JSW Cement, Zomato, Manappuram Finance, and others, where she is a board member.
Lastly, we have entered the new financial year and we are progressing well across all prospects of our business. We are gearing ourselves to a leap into the future. I feel confident about our organization’s vision and execution capabilities to deliver maximum value to our consumers, partners, and shareholders alike.
Thank you, and we would be pleased to answer your questions now. Over to you operator.
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 Ravi Swaminathan from Spark Capital. Please go ahead.
Ravi Swaminathan — Spark Capital — Analyst
Hi, sir. Good afternoon. Congrats on a good set of numbers.
Operator
Mr. Swaminathan, if you can speak closer to the handset please?
Ravi Swaminathan — Spark Capital — Analyst
Yeah. Hi, sir. Good afternoon. Congrats on a good set of numbers. My first question is with respect to the pricing action that we had taken at Cables and Wires segment over the past three to six months. What kind of price hikes that we had taken and how much is more or less, given the fact the commodities has been on a rising trend?
Gandharv Tongia — Chief Financial Officer
Sure. Thanks Ravi for your kind words. On the prices action, if I reflect on the quarter gone by, the raw material cost at the market level increased in almost double digit, whereas the price hike on a weighted average basis, we would have taken in lower teens. So that is where — slightly if you see, the margins have improved at contribution level. And you know this industry already, Ravi, every month, a player like us, we are revising our prices after considering increase or decrease in the input costs, for example copper or change in foreign exchange rate between USD and INR. So we will continue to follow the practice, which we have been following consistently over the period, and wherever there is a need to adjust our prices, we will continue to do that.
Ravi Swaminathan — Spark Capital — Analyst
Yeah. And are we confident that so basically we will be able to sustain or maintain gross margins, given the fact that past couple of quarters gross margins have contracted a bit year-on-year basis, in spite of the fact that wires and other products — higher margin products have increased in proportion. So would we be able to maintain gross margins which we have seen, say, last year, since FY ’21?
Gandharv Tongia — Chief Financial Officer
So Ravi, the business model which we have, gives us flexibility to price our input costs, particularly copper, where we have significant visibility on the selling price, and that is how we have been able to maintain our margins. At times, because of lag impact or the inventory in the distribution, there could be some delay. But if we take a 12 months view or annualized view, I generally believe that we should be able to give and take few hundred basis points here and there, generally we should be able to maintain our EBITDA margins.
Ravi Swaminathan — Spark Capital — Analyst
Got it sir. And with respect to traction, with respect to the first quarter so far, April, May and some part of June, how has it been in terms of demand, given the lockdown scenario?
Gandharv Tongia — Chief Financial Officer
So if I compare April and May of ’20 with April and May of ’21, I think ’21 is significantly better than the base. I know there are restrictions, there are lockdowns, but those are more — I mean, when compared to last year, these are slightly less negative on the business side of it. And since — in the current month, most of the states have started relaxing the lockdown restrictions. We expect that in the coming quarters, the performance will continue to improve. I believe that second quarter would be better than first quarter, and directionally, it seems that the second half of the fiscal will be better than the first half of the current fiscal.
Ravi Swaminathan — Spark Capital — Analyst
Got it sir. And with respect to, say, the breakup of revenue for FMEG if you can give, and the capex plan next two years if you can give that will be great sir? That’s my last question.
Gandharv Tongia — Chief Financial Officer
Sure. So on the capex, we anticipate that we would incur around INR300 crore odd this fiscal, around 35% will go for FMEG, which would have, say, for example, new capex on fan factory, DPW [Phonetic] factory, as well as you know, factories for pipe, and all that. So that’s around 35%. Balance would have a combination of a bit of a backward integration, as well as cable and wire facilities. In cable and wire predominantly, it would be because of special cables and exports cables. We have been need to make some investment.
In special cable, if you recollect in earlier quarters also I had talked about, that we are focusing on something called import substitute and we have been able to secure several approvals in the last few quarters. We want to now touch-up our facility, so that we can manufacture these products in India, in true spirit of Make in India and Atmanirbhar Bharat and supply to the Indian customers. So that’s a broad blueprint. There would be some slight maintenance also and all that. But overall, the capex would be about INR300 crores and thereabout.
I think your second part of the question was around the breakup of FMEG business. You would have already noticed, that this year we have entered the INR1,000 crore club in FMEG, and I think it’s a commendable performance by the team Polycab to reach that number in five, six years. If I break it down for you, it would be around 35% to 40% of fan, followed by lighting, which would be around 25% to 30%, followed by switches and switchgears around 15%, and pipe would have touched almost double-digit now. So that is a broad breakup of FMEG revenue which is INR1,000 crores plus in the fiscal ’21.
Vikas Mistri — Moonford Ventures — Analyst
Got it sir. Thanks a lot.
Gandharv Tongia — Chief Financial Officer
Thank you, Ravi.
Operator
Thank you. The next question is from the line of Pritesh Chheda from Lucky Investment Managers. Please go ahead.
Pritesh Chheda — Lucky Investment Managers — Analyst
Yes sir, I have one broader question. So from your Project Leap, Bandhan and Project Josh which have been mentioned over the last one year now, over the next three to five years, where do you see your company revenue sum total rising to? What kind of margins will we see three to five years from now? What capex would you incur to derive that size of the business? What would be your reach as a percentage of the market by then, and what is the organizational building activity that would — that has been done or needed to achieve that?
Gandharv Tongia — Chief Financial Officer
Yeah, so let me demystify it for you. I think, there is two or three different projects. Let me spend some time on Project Leap. This is a new project, which we have just started barely, a month back. We are working with the purchasing fee from Boston Consultancy Group, BCG. The objective is to transform the organization, and I dwelled about it in my opening remarks as well, we want to work on B2B, B2C, have the IT capability, as well as the processes and organization in place.
By end of fiscal ’26, is a forward-looking statement, we expect that we would be able to touch almost INR20,000 crore of top line, which is more than double than the current year. There could be several activities which will be carried out to build each of these blocks which are B2B, B2C, organization processes and IT capabilities and governance and ESG. Every half yearly, we will come back to you on your specific questions on EBITDA margins, capex, and what we have done and all that. But at this stage, I won’t be able to give you color only on revenue. As we go along, we would be happy to give you additional inputs.
Directionally, it appears that our EBITDA margin will improve, because the proportion of B2C business is increasing and that is where the margins are expected to go up, but I think we should wait for half yearly update where we can come and update you on the activities which we have implemented or carried out and the result thereof.
On your specifics on the market share and all that, I think we have already covered a part of it in my presentation, that we are gunning for 1.5x in one particular business category and 2x in other business category, as far as growth is concerned in comparison to industry group. But I think I would love to give you more information and color, when we come to the September presentation.
The second project is Udaan, which we initiated almost a year back and which was a cost optimization project. As of now, we have already identified cost optimization initiative translating to almost 80 to 100 bps of our top line. These are in the process of implementation, and we expect that these benefit will accrue over the period to the P&L of the company. But at the same time, the project is ongoing and it’s quite possible that we are able to unlock values, in addition to what we already unlocked in the quarters to come.
And on Josh and others, the third project is actually the Project Shikhar, which is sales acceleration program, which in a way covers both Bandhan, as well as Josh and that is on how we are going to penetrate the focal geographies and empower and create our influencer. So these are the three project on which we are working on and we will be happy to update you on half yearly basis, on the progress.
Pritesh Chheda — Lucky Investment Managers — Analyst
Sir, what is our distribution reach as a percentage of the total market, after this 165,000 retailers?
Gandharv Tongia — Chief Financial Officer
So we have almost 4,100 authorized dealers and distributors, around 165,000 retailers. We believe we have a sizable significant presence, as far as all the dealers and retailers are concerned. But the way the universe is defined, it’s slightly difficult to come to a precise number, and that is why it would be difficult for me to give you an absolute number, as an answer to your question. But every year, we have been able to improve our number of dealers and retailers and we will continue to do that.
Pritesh Chheda — Lucky Investment Managers — Analyst
Got it. Sir, just one last clarification, I missed it. You mentioned capex for ’22 was 300 — it will be INR300 crores and the mix that you gave for FMEG for FY ’21 was 30% fans, 20% lighting and I missed the other parts?
Gandharv Tongia — Chief Financial Officer
These are two different topics. One was on the — IT part. So the revenue breakup is what I explained, wherein the fan is almost 35% to 40%, lighting almost 25% to 30%, switchgear also 15% followed by piping, which is just about double-digit. On the capex side of it, for fiscal ’22, not for fiscal ’21 — fiscal ’22 we believe that we would be able to incur almost INR300 crores thereabout, and around 35% will be invested in FMEG and balance will be invested in cable and wire, particularly in special cables, exports cable, and part of network integration, and there will be some element of maintenance capex as well.
Pritesh Chheda — Lucky Investment Managers — Analyst
How much did you spend in ’21, capex?
Gandharv Tongia — Chief Financial Officer
It’s there in the presentation, it’s just shy of INR200 crore, INR191 crore. It’s on slide number 12.
Pritesh Chheda — Lucky Investment Managers — Analyst
Thank you very much and all the best to you, sir. Stay safe. Thank you.
Gandharv Tongia — Chief Financial Officer
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 — Analyst
Yeah, hi. Good afternoon, and good to see you back Gandharv. Just — and congratulations for a good performance in a tough year. The two questions, one is on the capacity expansion. So you answered it partly on the fiscal ’22 side. I was more focusing on the five-year plan to reach INR20,000 crores, I would imagine the company would read significant investments into capacity and since the efforts of the Group is to manufacture in-house, even if I take an average of INR300 crores a year into five, it’s INR1,500 crores of capex. If you could help us understand, what are the areas of investment you’re thinking to reach that INR20,000 crore goal over five years will be really helpful, in terms of what factories, what products are you thinking bringing in-house versus which are outsourced right now? That is one.
And secondly, on the B2B slide, where you mentioned that 1.5 times or 2x type growth for core and emerging products, if you could help understand what are these products we are talking about, if you’re splitting them into core and emerging, will be really helpful? Thank you so much.
Gandharv Tongia — Chief Financial Officer
Thanks Rahul. Thanks a lot for your kind words. I’m glad that you liked our performance. On the capacity expansion in capex for next five years, Rahul, on this particular project, I must admit that these are early days. We have barely embarked on the journey almost a month back. Though we have a broad picture label in terms of the top line and how we are going to do it, but there is a fair amount of detailing which is being done by the team, both by Polycab, as well as the consulting partner.
I expect that by second quarter of the year, sometime in October when we have the earnings presentation, I would be able to give you a bit of additional color, and then I will continue to update you on a half yearly basis.
I think for the time being on Leap, I think we should pick up the key messages. One is, we are committed to growth and we want to ensure that we are value-additive for all the stakeholders, including the investors, and that is why we have embarked on the journey with a very credible consultancy group. The second is, the top line target is INR20,000 crore. But beyond this detailing, if you allow me to come back to you in the month of October as part of Q2 presentation, I think that would be a good approach to have.
Rahul Agarwal — InCred Capital — Analyst
Okay. So one small thing on inventory, I’m not sure about the project name, but my sense is Polycab was working on inventory rationalization and improvements. If I look at last five year numbers broadly, we’ve stabilized about 80 days of sales. I’m looking at it as a number of sales and not on GOGS. Could you help me understand? I mean, we cannot — I’ve not seen real improvements there, could you help me understand, the entire project is already completed and the numbers have already come through or there is something left here? That’s my last question. Thank you.
Gandharv Tongia — Chief Financial Officer
So, you’re right. If I see on absolute number of sales, optically it would look like that there is no significant improvement. But if I played with the top line growth and increase in market share, that would help us understand the availability of each of these SKUs that the different sales point has increased. So that is where the science has been implemented. There is a fair amount of work which we have completed on finance goals, right from having the right architecture in place, what we need to store where, whether it’s some other way around or at the plant or whether we need to add to distribution and all that.
There is a bit of work which we haven’t completed yet on the RM side, on the raw material side, which is going up. Directionally, we believe that we can certainly optimize the inventory levels further. But in last couple of quarters, there was bit of a challenge on availability, and so you would have also heard about the availability and pricing pressure on the raw material side, and that is where we have to at times, take a step back and see whether we need to relook on the overall approach.
But to answer your question that whether the inventory can be further optimized or not, I believe that, yes, certainly it can be further optimized. But what we want to, at the same time ensure, is that we increased the availability because that is the clear differentiator for us in every marketplace. And the OTIF or on-time-in-full is generally between 95% to 98% as of now, which has improved significantly in, I would say, last three to four years and we as a company would like to reach 200%. I know it sounds impossible, but directionally we would like to reach 200%, that is where we — all of us are working.
Rahul Agarwal — InCred Capital — Analyst
Perfect. Thank you so much. All the best.
Gandharv Tongia — Chief Financial Officer
Thank you very much.
Operator
Thank you. The next question is from the line of Aditya from Axis Capital. Please go ahead.
Aditya Bagul — Axis Capital — Analyst
Hi Gandharv and team. First off, congratulations on great set of numbers. I hope Gandharv you are doing well. Gandharv, I have three questions. One is on our FY ’26, sort of roadmap that we’ve put through. I would assume that the FMEG growth of high teens to early 20s would be a key cornerstone of that strategy. Just wanted to understand from you, some nuances as to — in which segments that we are targeting has high growth, and how are we likely to achieve that? That’s my question number one.
My question number two is, in terms of cash conversion rate. We’ve done INR1,200 crores of operating cash this year and it’s a stellar number. I just wanted to understand on a steady state basis over the next three to five years, what is the kind of cash conversion that we can expect? And the third is, with INR900 crores plus of cash on our balance sheet, are we looking at any inorganic additions?
Gandharv Tongia — Chief Financial Officer
Thanks Aditya. Thanks a lot. I think these are great set of questions, and thanks for highlighting our performance. So the first one, I believe, the real growth drivers of growth engines between now and FY ’26 would be exports, as well as B2C revenue. B2B will continue to play its role, but I think that in terms of growth percentage, B2C will outshine B2B. There could be some element of adjacencies. But I think the core product categories where we are present, these categories will drive the most of the growth and towards 2026, INR20,000 crore.
On the cash conversion, as I mentioned in one of the responses earlier, allows time to come back to you on a six, seven month basis, because we are still very early to this particular initiative. We want to beat these numbers, and decide what all we want to externally communicate and then commit ourselves to those number, so that every quarter, every six months we can go back to the investors and update them. So I’ll come back to you on that in October. But I believe that cash conversion will continue to improve in the years to come.
On M&A, we are actively involved in few of these activities, including identification of the focus areas, zeroing on the target and then doing the procedural aspect of it. I am hopeful that we would be able to update you soon on these M&A activities as well.
Aditya Bagul — Axis Capital — Analyst
Thanks Gandharv. I have two follow-up questions. One is within our target of achieving INR20,000 crores, we are looking at B2C, B2B kind of a split, rather than Cables and Wires and FMEG plus exports obviously. Is that a fair way of understanding things, because then we would be also building in a fair bit of growth when it comes to housing wires and other B2C wire segments as well. Just trying to understand your thoughts in there?
Gandharv Tongia — Chief Financial Officer
Absolutely. I know that’s a way to review our performance. We have two growth engines. One is B2B, which has traditional cable business, and then we have B2C, which has retail wire as well as FMEG business. And then on top of it, we have the export business. So that is how we are internally trained to improvise our growth performance, as well as that is how we review our performance.
Aditya Bagul — Axis Capital — Analyst
Perfect. Thank you. Just one last question. With regards to our INR20,000 crores target, you do not built-in any inorganic addition, right, I mean, you’re talking about this on an organic basis?
Gandharv Tongia — Chief Financial Officer
Yeah, as I mentioned, Aditya, I’ll come back to you in the month of October and to the extent possible, I’ll give you additional color on this. And then from there we can take it forward. On a half yearly basis, we can assess [Indecipherable].
Aditya Bagul — Axis Capital — Analyst
Perfect, perfect. Thank you so much. Congratulations once again and best of luck for the quarters to come.
Gandharv Tongia — Chief Financial Officer
Thank you. Appreciate it.
Operator
[Operator Instructions] The next question is from the line of Yellapu Santosh from Asian Market Securities. Please go ahead.
Yellapu Santosh — Asian Market Securities — Analyst
Thank you for the opportunity. Congrats on the good set of numbers. I had couple of questions. Sir, when you’re internally targeting for 12% EBITDA for the FMEG business by FY ’26, what would be the approximate top line that you’re having internally in that thought process when you’re building and what are the initiatives you’re taking to reach that kind of milestone on the top line front, as well as on the margin profile? If you could give some color on it. That’s the first question.
And the second question, from a long-term from three to five-year cycle point of view, what all initiatives you are taking, so that the exports distribution strategy pans out the way we are thinking, you know in each specific geographies, any specific products you are targeting, having — we have won recently few export orders from Australia to South America to North America. So we winning a lot of export orders. So what is your thought process there? If you could just give some color in both the points, would be thankful.
Gandharv Tongia — Chief Financial Officer
So the first one, the growth will continue to come from B2C and exports followed by B2B. But as I mentioned to Aditya, allow us time till October where we can come back and give you more color on how this INR20,000 crore will be achieved. On the exports, we have been able to improve our presence across the globe in the last around 24 months. We have additional approvals in place. For example basic approvals or URL approvals and all that. If we just slice and dice our exports, I would say that almost 50% or thereabout is coming from U.S., followed by Asia and Australia, and then rest of the world.
We believe that having this twin approach of going after few identified sectors, as well as having local presence in identified geographies, would help us in improving our top line, and that is why we believe that export will be a key contributor to our INR20,000 crores topline target by fiscal ’26.
Yellapu Santosh — Asian Market Securities — Analyst
And sir, one follow-up question if I may. Sir, what is the timeline have you put to the top three premier cities we want to penetrate? So there is still some way to go ahead and penetrate the top premier cities. Any timelines, any targets, and how you could contribute to our growth, if you could just give some color or some numbers, that would be very insightful?
Gandharv Tongia — Chief Financial Officer
At this stage, in terms of quantified targets, I would be able to give you a top line target of INR20,000 crores by fiscal ’26. Within that, the breakup, it would be a bit difficult for me to give you, because we have just embarked on this particular journey. So if you just allow me time till October, I’ll come back to you on the targets, which we will be able to talk about externally, and along with the investors. And then after that, we can then do a follow-up every six months.
Yellapu Santosh — Asian Market Securities — Analyst
Thank you, sir. Thank you for your time.
Gandharv Tongia — Chief Financial Officer
Thank you for questions and time.
Operator
Thank you. The next question is from the line of Chetan Gindodia from AlfAccurate Advisors. Please go ahead.
Chetan Gindodia — AlfAccurate Advisors — Analyst
Hello Gandharv, and team, and congratulations for a great set of number. I had just one question. Can you give us a sense of the volume growth and the pricing growth for FY ’21 for the Wires and Cable segment?
Gandharv Tongia — Chief Financial Officer
Thanks for your kind words. You know this industry already. It’s a bit difficult to give volume data and that is the — most of the large players, they don’t get it. And I’ll tell you why this is difficult, because if I sell copper cable, length of cable per meter, compared to [Phonetic] an aluminum cable of the same length, the pricing would be significantly different. I think the best way to analyze from your perspective, a particular company’s performance, is to compare it with peers performance, and if it is — this growth rate is slightly better or worse than the peer, that is where you can rate the company, because the quantitative information is not — necessarily would get — add any value.
Chetan Gindodia — AlfAccurate Advisors — Analyst
Okay. Still, if you can give some sense on whether the volume growth in this quarter was in double digits or at least some sense, that would help us analyze whether, you know, what is the underlying growth?
Gandharv Tongia — Chief Financial Officer
Yeah. So most of the growth has come predominantly from the B2C business categories, both from FMEG as well as the retail wire. FMEG has already touched or crossed INR1,000 crore, and retail wire continues to grow at a rapid rate. I would say that the LDC business is growing significantly. On the cable, core cable side, there is some sort of sluggishness on the institutional. But overall, the pecking order is like this, that we do see quarterly.
Chetan Gindodia — AlfAccurate Advisors — Analyst
Okay. And just a clarification, you said that B2C business contribution is currently 40.2% in FY ’21. So this is for the overall revenue including FMEG or this is just a breakup of Wires and Cable segment?
Gandharv Tongia — Chief Financial Officer
This is overall, including FMEG, which is B2C plus wire business. Again, wire business which is outside — which is outside, FMEG plus retail wire, both put together is almost 40.2%.
Pritesh Chheda — Lucky Investment Managers — Analyst
Okay. Thank you. Thank you, Gandharv, and all the best to the entire team.
Gandharv Tongia — Chief Financial Officer
Thank you. Thanks a lot.
Operator
Thank you. The next question is from the line of Manoj Gori from Equirus Securities. Please go ahead.
Manoj Gori — Equirus Securities — Analyst
Yeah. Thanks for the opportunity, Gandharv, I’d like to [Indecipherable] by connection. Couple of things. One would be on the cable front. So if you look at current — in the current system, we witnessed strong traction for the Wires business. However, the institutional business was relatively a laggard, and we were able to see — industry was able to see some green shoots during February and March. So because of the second COVID wave, do you feel like this business is back on track or there would be some delay for this business to back — to be normal?
Gandharv Tongia — Chief Financial Officer
Okay. So the cable — the distribution was — any which ways back to almost pre-COVID levels after the wave two. But the challenge was on the institutional side, there also we have seen some bit of traction in the fourth quarter. But I think we’ll have to wait for wave — for a month or two, before we finally decide and conclude where we are back — whether we are back to the pre-COVID levels on the cable — this thing. But directionally, I believe that second half of the year — of the current year should be better, both for institutional as well as distribution business.
Manoj Gori — Equirus Securities — Analyst
Right. And also, does it indicate that — suppose of last year, whatever institutional business that has been lost for the industry, so there might be some pent-up demand when the situation normalizes, and move back to the pre-COVID level in volume terms and this — yeah?
Gandharv Tongia — Chief Financial Officer
Yeah. So I think the element of pent-up demand is expected to be there, both in B2C as well as [Technical Issues]. Whether the pent-up demand will take us back to the pre-COVID levels or not, that would be difficult for us to comment at this stage. But I think directionally, we should be able to [Technical Issues] pretty soon after the first quarter.
Manoj Gori — Equirus Securities — Analyst
Right. So, lastly on exports, I think overall in the call, you have explained very well regarding the long-term strategies and everything. On the exports, if you have been focusing a lot on the U.S. markets, so how are things ramping up over there and what the overall outlook, and in terms of distribution model over there? So can you throw some light over there. That could be helpful.
Gandharv Tongia — Chief Financial Officer
Change in the distribution — we have already established a distribution model there. What now we are trying to do is, further penetrate the market and see if we can introduce additional product category. This will continue to be continuous process of penetrating all the overseas geographies, including U.S. And like — U.S. is top on our priority is because, as of today, U.S. contributes almost 50% to our exports top line. But outside the U.S. as well, there are geographies. For example, just to illustrate Australia or part of Asia, where we can further augment our top line through exports.
Manoj Gori — Equirus Securities — Analyst
Great. That was very helpful and wish you and the entire team all the best.
Gandharv Tongia — Chief Financial Officer
Thank you, Manoj. Thanks a lot for your kind words. Appreciate it.
Operator
Thank you. The next question is from the line of Sanjaya Satapathy from AMPERSAND. Please go ahead.
Sanjaya Satapathy — AMPERSAND — Analyst
Yeah. Hi. Congratulations once again on a good set of numbers, just if you can share with us the gross margin of your FMEG business, and the main reason why I’m asking it is that, like how do you compare in terms of profitability at gross level [Technical Issues] both in terms of pricing as well as product stability point of view.
Gandharv Tongia — Chief Financial Officer
So in the mature product categories within FMEG, we have already reached to the industry level gross margin, which are give and take few percentage points here and there around 30% thereabouts. And in the product category, which are comparatively smaller than the FMEG market, there is some scope for improvement in margins. And as far as EBIT margins are concerned, those, you would have already seen, have improved in the previous [Indecipherable], but that’s mainly because we have slightly higher cost base, which will get optimized with increase in the top line and these projects like Udaan, which is a cost optimization project, as well as Project Leap, would also help us in improving these margin.
Sanjaya Satapathy — AMPERSAND — Analyst
Understood. [Technical Issues].
Operator
Mr. Satapathy?
Sanjaya Satapathy — AMPERSAND — Analyst
There is a lot of noise, I am not able to understand what is going on.
Gandharv Tongia — Chief Financial Officer
[Technical Issues]. Operator, I think you need to mute someone. I think there is disturbance coming from one of the lines.
Operator
[Technical Issues] Checking, sir. We take the next question from the line of Rajesh Kothari from AlfAccurate Advisors. Please go ahead.
Rajesh Kothari — AlfAccurate Advisors — Analyst
Good afternoon, sir. Congrats for the good set of numbers. Sir, it seems you talked about next five years’ vision, in the FMEG segment, are you planning to enter into the new product categories in that segment? And whether it will be existing segment or it will be a complete new segment?
Gandharv Tongia — Chief Financial Officer
At this stage, Rajesh, we are at growing stage, old stage. Theoretically, it is possible, but we have not closed our thought process there. The focus remains that we continue to grow the existing product categories. For example, fan, lighting, lum, switchgears, tube pipes, grow [Phonetic]. But as I mentioned as a response to one of the earlier questions, allow us time till October, by when we’ll come back to you, in case we have any mature thought process.
But within FMEG, I would like to call out one specific thing which you would have noticed already, that we are trying to play a level up, as well as level down in the existing pricing portfolio. So for example, we introduced home automation, around a quarter back, which is a premium category, which will be revenue accretive as well that will help us in augmenting our top line. Theoretically, there is slightly different from the existing product categories, because on automation side — but this would help us in getting a boutique product or a bouquet of product to our customer.
Rajesh Kothari — AlfAccurate Advisors — Analyst
Okay. And my second question is, since company has drawn a very ambitious plan for next five years, are there any major new recruitments at the senior leadership level? And if yes, if you can disclose the same, that will be great.
Gandharv Tongia — Chief Financial Officer
Absolutely. So we can’t reach top line of INR20,000 crore without having right set of people, processes and capital. Processes, I have already talked about where I was explaining the Leap. In terms of the fact that we have re-shuffled the Board and we have younger and high energy individuals who are going to lead us from the Board. We have Independent Director like Sutapa, who — she has significant amount of experience and she’s comparatively younger.
On the management team, there are couple of changes. We have recently hired Mr. Rajesh Nair as our CHRO. He was with Tata Motors for almost 28-odd years and I’m very confident that he would be able to help us in improving our HR practices and people management practices, because here when we are thinking about ambitious target, we have to ensure that these ambitious targets are well knitted with the PMS and KRAs of the business and function head, and that is where someone who is joining us from Tata Group, would help us immensely.
Nilesh joined us almost a year back as Head of Marketing. He was instrumental in shaping the brand architecture, as well as marketing plan at JSW Steel, and he is doing a tremendous work on the marketing roadmap for — and brand architecture for Polycab, and I’m expecting results of that would start reflecting in the quarters to come.
We continue to augment our senior management team. As you know, we have very attractive compensation strategy, both in cash as well as through SOPs, and we would be — we are very confident that we’ll continue to do that. As a matter of fact, if I’m not wrong, we would have almost 25 odd individuals who will be growing more than INR1 crore of package on annualized basis, excluding this compensation. So that shows the quality of manpower which we have assembled over the period and these high energy, highly driven individuals, would help us in implementing the Project Leap and other projects that I talked about.
Rajesh Kothari — AlfAccurate Advisors — Analyst
Great sir. Thank you, sir. Wish you all the best.
Gandharv Tongia — Chief Financial Officer
Thank you very much for your kind words.
Operator
Thank you, ladies and gentlemen. Due to time constraint we take the last question from the line of Vikas Mistri from Moonford Ventures [Phonetic]. Please go ahead.
Vikas Mistri — Moonford Ventures — Analyst
Hello, am I audible?
Gandharv Tongia — Chief Financial Officer
You are. Please go ahead.
Vikas Mistri — Moonford Ventures — Analyst
Gandharv, my question is that, would we be looking for the new product lines like microinverters and something, software IoT based automation system, as you mentioned, we are also looking towards energy efficient home solutions to the customers and all that?
Gandharv Tongia — Chief Financial Officer
Yeah, I think your question is around whether are we going to get into home automation, IoT and all that? Answer is, yes. We have already taken a baby step by launching home and will continue to take steps to expand on this side of FMEG business. We believe that the consumer business will get significant amount of traction through this IoT automation route, and we’ll continue to make investment accordingly.
Vikas Mistri — Moonford Ventures — Analyst
My question is mainly pertained towards software side. Are we looking at strategically thinking about giving customers better energy efficient solutions, in form of software and coupled with the hardware, such that they could save energy on account of doing that?
Gandharv Tongia — Chief Financial Officer
Absolutely. In fact, that is the key differentiator for us. Most of our products come with energy efficiency, and if I may say, we can easily be considered as the industry leader on that aspect. We recently launched BLDC fan, which would be energy efficient product and there are several other projects in pipeline. So we’ll continue to do that, as well as our consumer continue to get energy-efficient products and they get best of Polycab to experience.
Vikas Mistri — Moonford Ventures — Analyst
Okay. My follow-up questions to same is that, how many workforce is in innovation and new product development, and how we are looking to ramp up this human resource capabilities, to make sure that we come up with cutting-edge new innovative products and…
Gandharv Tongia — Chief Financial Officer
Yeah. So it’s a combination of both internal team as well as external team. Externally, we partner with several industry leaders and consultancy organization. Internally, we have around 100 to 150 manpower team who are doing only R&D throughout the year. Very recently, we’ve picked up a large team from an existing Indian — of a large one player and that team will also continue to help us in improving our R&D as well as innovation aspects of our business.
Vikas Mistri — Moonford Ventures — Analyst
Good to hear, Gandharv, and we hope that you keep on driving the innovation thereon.
Gandharv Tongia — Chief Financial Officer
Thank you. Thanks a lot for your kind words and wishes.
Operator
Thank you. I would now like to hand the conference over to the management for closing comments. Over to you, sir.
Gandharv Tongia — Chief Financial Officer
Thank you everyone for your time. In case, if you have any follow-up questions, please write to us at investor.relations@polycab.com. Stay safe and take care and follow social distancing norms. Thank you, operator.
Operator
[Operator Closing Remarks].