Cable and wires maker Polycab India saw an 88 per cent growth in exports with the US and Australia making up for majority of its overseas sales. The company capitalised on the ‘China Plus One’ strategy across these countries, toppling larger Chinese suppliers, while ramping up distribution and offerings there, says Gandharv Tongia, ED and CFO of Polycab.
According to him, the company applied for quality certification in the US (on the lines of ISI and BIS), which helped it tap further into the US market.
“Exports business has been doing well in Q1 and was at 9 per cent of Q1FY24 turnover. We capitalised on the China Plus One strategy across developed nations, like the US and Australia,” Tongia told businessline. Polycab has a presence in 70-odd countries, including West Asia.
In April–June quarter (Q1FY24), it reported a 42 per cent y-o-y increase in turnover at ₹3,890 crore, while profit after tax increased 81 per cent to ₹403 crore.
Cables and wires biz
Cables and wires, the prime business vertical, saw revenues grow by 46 per cent yo-y, “despite lower commodity prices” (which were passed on to the market) but strong volume growth. Margins are expected to be in the 11–13 per cent range for the fiscal.
According to Tongia, “macro economic trends continue to be positive” and industry is witnessing good demand supported by government measures, improving private capex and strong real-estate offtake. Geographically, the highest growth came from the northern region.
“Our guidance is to achieve ₹20,000-crore turnover by FY26. But, going by current revenue trends, we should achieve it ahead of the timeline,” he said.
The fast moving electrical goods business (FMEG) is also expected to turn EBITDA positive within this fiscal and it would contribute 10 per cent of turnover by FY26. The vertical includes categories like lighting, fans, among others.
“Margins should improve quarter on quarter,” Tongia said adding that the segment showed a three per cent y-o-y sequential growth following “channel realignment” and benefits of the same playing out.
While growth in the FMEG business was muted because of “weak consumer sentiment”, fans saw “healthy growth” as older non-BEE compliant inventory with channel partners was sold off.
Growth in switchgears, conduit pipes and fittings businesses were driven by the real estate sector; and switches saw sales growing 3.8 times over the same quarter last year (low base effect). Lights de-grew on a sequential basis, following “continued price corrections” in LED.
“Quality of earnings have improved with channel finance penetration now at 91 per cent for the FMEG business,” he said.