Why is the Company not resetting margin guidance higher when consistently delivering 14.7% versus the 11-13% guidance?
The 11-13% EBITDA margin guidance is a longer-term 5-year guidance, not yearly. Multiple variables impact long-term profitability: cables-wires mix and exports help margins, but capacity expansion investment drags operating margins in near to midterm, and B2C A&P spends will increase every year. Keeping all four variables in mind, the long-term guidance remains 11-13%. Internally, we'll try to optimize and improve where possible, but the longer-term guidance stays.
Within FMEG, on solar (now the largest category), what is the in-house vs outsourced manufacturing mix, capacity expansion or localization plans, and market share?
Solar is the largest category in FMEG this quarter; other categories contribute relatively equally. Except solar inverters, everything is manufactured in-house and there are no plans to change this - solar inverters will continue to be outsourced. On market share, solar inverters is too early to pinpoint as we're a smaller player; in fans, lights, switches and switchgears, market share hovers between 2% to 5%.
Did the strategic pricing benefit from lower procurement prices? Is the understanding correct?
Pricing is similar for everybody since it's linked to LME, though order timing during the quarter can give particular benefit. What was meant by strategic pricing revision is that since copper prices were trending in one direction with low volatility, we were able to swiftly pass through prices without taking any profitability hit.
Are good C&W margins sustainable due to mix and operating leverage?
We have a long-term guidance of 11% to 13% EBITDA margins through FY30, irrespective of business type, procurement or commodity prices. In the near term we'll try to maximize on whatever variables are presented and hopefully maintain margin profile.
What is the extent of industry capacity expansion - 20%, 40%, 50% over next 3 years?
Only 3-4 large listed players give those numbers, so visibility is limited. More important than supply is the phasing and demand context. We are comfortable that near to midterm demand will absorb the capacity coming online based on announcements over next 3-4 years, with no impact on industry growth or large players.
On solar products - what's the scale of the opportunity and how is the product portfolio evolving?
We have only solar inverters as the sole product category. We cross-sell solar cables and switchgears where possible. Opportunity size: central and state government scheme outlay represents about 1/3rd of total solar rooftop cost - so multiplying by 3 gives the overall opportunity size.
What's the margin contribution of solar products in overall FMEG basket?
It varies across product categories - solar cables contribute in wires and cables, solar inverters now have a large contribution in FMEG, and the mix will keep changing over coming quarters.
Can you throw some light on the export scenario, particularly in the U.S. geography because of the tariff issue, and the growth outlook across the FMEG categories?
U.S. is one of the largest consumers of cables and roughly 1/3rd of our exports went to the U.S. this quarter. India's 10% tariff position is favorable versus China at 55%, Mexico at 30% (effective 1st August 2025), South Korea 25%, Vietnam 20% and Philippines 20%. On FMEG, after stabilizing at Rs 1,200-1,300 crores, the business has gained traction over the last 5-6 quarters and Project Spring targets 1.5-2x industry growth (industry growth currently 8-10%) with EBITDA margins reaching 8-10% by FY30.
Can you also please throw some light on the capex plans for the next 2 years, FY 26 and FY27?
Within Project Spring, the guidance is to spend roughly Rs 6,000-8,000 crores over the next 5 years, or Rs 1,200-1,600 crores annually. In Q1 we spent Rs 410 crores, in line with the guided range. A large part of capex will go to the Cables and Wires business, with the remainder for backward integration and a small part for FMEG.
Outside of U.S., in markets like Middle East, Australia, are we seeing pricing aggression by Chinese players and incremental orders coming at lower pricing?
Going geography by geography: in Europe, customers are willing to pay a premium for non-Chinese alternatives so no dumping is seen. In the Middle East, particularly Saudi Arabia where India enjoys a better tariff, competition from Chinese players is limited. Australia is the one geography where China has a competitive edge due to a zero tariff treaty, requiring Polycab to compete on pricing or service terms. In other geographies, no dumping effect is anticipated.
Are we seeing any slowdown given some macro indicators in India have slowed marginally - any impact on government ordering activity?
We are not witnessing any form of slowdown. Government spending since December has averaged Rs 1.26 trillion per month versus Rs 0.64 trillion per month during April-November '24. The government still needs to invest roughly Rs 1 trillion per month for the rest of the year. On wires, while top metros show some slowdown, Tier 3-5 cities are picking up via the Etira brand, and Maxima/Suprema are seeing good traction in metros. We expect very good momentum in the remaining three quarters.
On margins, can you give detail on the strategic initiatives that drove margin expansion?
On cables and wires, copper price volatility was lower this quarter and movement was directional, making pricing transfer simpler and allowing us to maximize benefits from commodity price movement. Additionally, lower EPC contribution and higher Cables & Wires (which has better margins) helped at company level. On FMEG, we saw gross margin expansion across all product categories, improving FMEG profitability and indirectly contributing to overall company profitability.
Within Cables and Wires, what was the approximate mix of cables in revenue for the quarter?
Cables will be close to around 73% to 74% of the mix and the remaining will be wires.
What was the EPC order book and do you expect more projects to come in?
End of March open order book was roughly Rs 70 billion. After winning a BharatNet project, the total outstanding capex part is around Rs 80 billion, excluding GST. This will be accrued over the next 3 years.
What is driving consistent market share gains in cables and wires - is it capacity, product, distribution? And are gains from unorganized or organized space?
It is a mix of both - having capacity, the largest set of approvals, the largest bouquet of SKUs in Cables and Wires have continuously worked for us. Additionally, the movement from unorganized to organized has picked up pace in recent quarters. Both factors contributed to continuous market share improvement.
What is our current market share in cables and wires?
Based on FY25 data (since Q1FY26 results from peers are not yet available), our organized market share in C&W combined was roughly 26% to 27%. In cables we are higher, closer to 30%, while in wires we will probably be in early 20s.
On BharatNet projects - opportunity pipeline, margin profile, working capital and competitive intensity in tendering?
We won 2 orders out of 16 tenders opened, with more tenders (part 2 of phase 3) yet to open. We expect to accrue 12% to 14% of margins in this order book, in line with current margins. Working capital is favorable due to upfront payment of almost 10% of order book and historically receivable days have been on time. Overall, it's a good business with good margins and less working capital cycle.
Was the Q1 export growth driven by the rolled-over Q4 order or organic growth?
The rolled-over order has not been executed at one go - it will be executed over the entire year. So it was not the single contributor; the Q1 exports growth is organic, achieved through execution of multiple orders across geographies.
So the rolled over order will continue executing through the rest of the year?
Yes, that's right - the order will continue to execute through the rest of the year.
With the 'big beautiful bill' cutting renewables in U.S., will Prysmian, Nexans, Southwire, LS dump capacity into other geographies?
Prysmian, Nexans and other large global players are predominantly on the higher voltage side (EHV) for renewable evacuation. When we export to U.S., it's largely low voltage and some medium voltage cables - we compete more with Chinese players, not Prysmian/Nexans. Additionally, AI-driven data center investments and 60-70 year old power infrastructure upgrades in U.S./Europe will continue to drive cable demand. So renewables pullback won't materially impact our exports.
EHV capacity is fungible - we can use it for low, medium and high voltage if we don't manufacture EHV?
That's true - EHV capacity is fungible across low, medium and high voltage.
So your earlier complete hedging policy did not apply for this quarter?
No, we continue to follow the hedging policy. About 90% of our sales are through distributors and 10% institutional. We hedge our entire copper procurement for the distributor channel since we don't have an order book in place there. Institutional is back-to-back pricing, so no meaningful price impact there.
Does Polycab still have a cables capacity advantage over the industry?
New industry capacities have been coming up since the beginning of last year, yet we continue to grow ahead of the market. Beyond capacity, what matters is portfolio - number of SKUs, approvals, and distribution. These are variables we've worked on for decades and that advantage continues. Investment and growth from various end sectors also helps absorb new capacities from peers, supporting our outperformance.
Cables outpaced wires this quarter - which categories of cables (low/medium/high voltage) drove the growth and what's expected for full year?
We have presence in low, medium and high voltage but not extra high voltage. Low voltage and medium voltage are the largest segments at industry level and where we have maximum presence - both helped drive this quarter's growth. Other types like control, instrumentation, optical fiber and HV cables have smaller demand. In the near to midterm, low voltage and medium voltage will be the primary growth drivers for both the industry and Polycab.
What's happening with the declining EPC revenue?
We have an order book to execute over the next 2-3 years with quarterly variations. Different phases of execution exist - supply phases have better margins, execution phases are softer. On a yearly basis we'll be in line with last year's guidance. Near to midterm EPC contribution will continue in the 5% to 10% range.
With BharatNet, do you see EPC contribution going up beyond 5-10% over next 3 years?
EPC execution on BharatNet will begin from second half of this year. Given strong cables and wires demand and FMEG growth, EPC contribution won't go materially above 10%. On a quarterly basis it might spike when supply or execution is high, but on yearly basis it won't exceed 10% in the longer term.
Margin should improve given BharatNet has 12-14% margins, right?
Yes, BharatNet will generate 12% to 14% EBITDA margins. The RDSS order book will generate high single digit margin profile.
What's the progress on RDSS - new orders or slowdown?
New tenders have opened up that we've bid for; results expected during the year. RDSS scheme runs till end of FY26 with more tenders yet to open. Traction continues in RDSS.
What's the volume mix of copper vs aluminum for the quarter?
It's largely the same - there is no material change in the copper-aluminum mix.
What's the revenue share of Etira and Hohm brands? And what new solar product categories is Polycab considering?
Hohm is in Home solutions, not wires. Etira contribution in retail wire sales is in the high teens. Premium ranges Maxima and Suprema each contribute close to around 20% to wires sales. On solar, we are primarily into solar inverters with no plans to expand to other categories like solar pumps. We cross-sell solar cables and switchgears with inverters.
Solar has done very well with 2x growth - which geographies is the demand coming from?
Demand is largely driven by the central government's rooftop solar scheme plus state-level incentivization schemes. Key states include Maharashtra, Gujarat, Rajasthan, MP, Telangana, Tamil Nadu and UP.
On Rs 4.1 billion Q1 capex, which segment was it allocated to?
Largely on Cables and Wires business. There's no immediate requirement for incremental FMEG capex; that may come towards the mid-to-end of the next 5 years. Most current capex is for C&W or backward integration.
On FMEG mix - solar is now larger than fans/lights. Was last year fans/lights the largest contributor?
That's true. In this quarter, solar was the largest contributor. Last year, fans and lights were the largest, with solar being the third largest contributor to FMEG topline.
Is solar inverter demand a one-off due to government rooftop scheme or sustainable?
Demand is sacrosanct in the near to midterm. Only 20% of the central scheme has taken off so far, plus various state schemes. Until those schemes continue (at least next few years), continuous demand for solar inverters is expected.
Does the Rs 80 billion EPC order book include the Rs 56 billion BharatNet order book?
The Rs 80 billion order book is BharatNet only. Over and above that, RDSS order book is roughly Rs 38 billion to Rs 40 billion.
What's the execution timeframe for these EPC order books?
All of it has to be executed over the course of next 3 to 4 years.
Can we expect EHV revenue contribution by FY27?
EHV is tender-based. Once the plant is up and commissioned, we have to bid and win. Any meaningful revenue accrual will only happen in FY28.
Do you plan to set up a manufacturing plant internationally in the next 18-24 months?
In the longer term yes, but in near to midterm there are no plans to set up manufacturing plants outside India. Our export advantage is from low-cost manufacturing in India - we'll continue investing in domestic capacity. International setup may be a consideration for the next decade or two.