Would you have FY24 volume growth for cables, wires and overall in the domestic business?
I don't have it handy, but we have disclosed it in our last year's call. So, probably you can refer to that.
Is the market share gain a result of GTM and regional approach or anything else?
That is a continuous work-in progress. It obviously would have contributed in the improvement, but the larger part of the improvement would have been because of the operating leverage and change in product mix. Incrementally, if you look at a longer-term period, maybe over a period of one year, two years, three years, the other initiatives will definitely contribute much more meaningfully.
Would it be right to assume that EBITDA margins (13.2% full year) can only improve from here as exports exposure grows?
There are multiple variables at play. Definitely, since exports business is a relatively higher margin business and if the mix improves, that should help margins. But we are also going to invest a lot in capacity expansion over the next five years where utilizations will be low initially and operating leverage goes away. We will also invest a lot in advertising and promotion for B2C, and on R&D and innovation. So there are positive and negative variables - we have given a guidance of 11% to 13% and we are reasonably confident we should be able to deliver within those margin guidance.
On R&D expenditure - where will this go and any guidance as a percentage of sales?
We wouldn't want to give guidance on the percentage, but on an absolute basis, definitely it will continue to go up and it is not just a near-term phenomenon - it is something that we will do consistently. One of the pillars within our Project Spring guidance is increased focus on innovation and R&D, and we will continue to focus much more aggressively than what we have done in the past.
Given low US base and transition completion, can we expect a strong bounce back in US exports?
There is a bit of uncertainty because of the tariff-related announcement which should get resolved in the next couple of months. Then we believe there should be much better improved momentum as far as sales to US is concerned. As of now while the improvement will be there because of business model getting stabilized, much better momentum can be witnessed only after the entire tariff-related changes are implemented.
How relevant is power generation and T&D demand for us, and within power generation - thermal vs renewable split, and proportion supplied to BSNL?
It would be very difficult to quantify which industry contributes what exact demand since most sales are through distributors. But based on channel partner feedback, this sector contributes very meaningfully. We are very actively present in power generation and distribution where LV/MV cables are required and we are a big player. Power transmission presence is limited as of now but within a few quarters we should be able to start participating. With the power sector expected to do very well over the next three to four years, we should be in a very good position.
Are you seeing incremental opportunity from RDSS-related projects moderating beyond FY26?
As of now, the RDSS scheme is up till FY26, and tenders for various projects under that scheme are continuously awarded. We will have to wait and see if that scheme is extended by the government, and if it happens, we will participate in that scheme going ahead.
On the domestic cable and wire segment which grew 27% YoY - could you quantify how much is volume vs value growth, and the split between cables and wires?
The volume growth within the domestic cables and wires for the quarter YoY was around mid-teens, with the remaining growth coming from value. Within that, cables grew faster than wires - cables volume growth was in the higher teens while volume growth for wires was in high single digit.
Can you give the same volume growth split for FY25, and remind us about FY24 - between cables, wires and overall domestic?
For the entire year, the volume growth for the cables and wires business has been around mid-teens. Cables has grown a bit higher and volume growth for wires is again in high single digits. This is aligned with our guidance that we expect this market to grow between 1.5x to 2x of real GDP growth and us to outperform over that. We believe our market share now in the domestic organized market is closer to around 26% to 27%.
On the strong Q4 margin performance despite weak exports - have there been any inventory gains or one-offs given Q4 is the balancing quarter?
There are no one-offs as far as margin improvement is concerned. The entire improvement is largely because of the operating leverage that we have got the advantage of. If you look at our margin trajectory of last three to four years on a quarter-on-quarter basis, you will notice a consistent improvement sequentially in every quarter and 4th quarter is always the best in terms of margins.
What is the EBIT margin guidance for cables and wires for the next three to four years?
Our guidance, as a part of Project Spring, is on EBITDA and we've given the guidance that over the near to mid-term we expect the EBITDA margins in the cables and wires business to be consistently in the 11% to 13% range.
This 11-13% guidance is only for the cables and wires piece, right? And what was it for FY25?
Yes, that's only for cables and wires. EBIT margins for cables and wires for the year were at 13.6%, so EBITDA margins would have been in the range of 14% to 15%.
On the 100 bps margin expansion in cables and wires - is it regionally driven or broad-based, and key drivers GTM and portfolio expansion or anything else?
The margin expansion that we are seeing in cables and wires is on a sequential basis from Q3 FY25 to Q4 FY25. This expansion is a bit because of the operating leverage as well as because of the change in product mix. While on a YoY basis, cables has outperformed wires, sequentially Q4 over Q3, wires has grown faster than cables and since wires are a better margin business, it has also contributed in sequential improvement of margin. Although our international business didn't perform as well, has taken a bit of sheen off that improvement.
On the solar portfolio - what is Polycab's value proposition, GTM strategy (system integrators, EPC contractors or direct)? And plans for backward investment in manufacturing?
Largely we sell solar inverters in that portfolio. These are not manufactured in-house, we outsource the manufacturing and then sell it to the end customers. As of now, there are no plans of setting up an in-house manufacturing. So, we will continue with this model. We will obviously onboard more vendors through which we can increase our sourcing and then service the full range up-till 325 kW, which is what is the upper limit as far as the usage in India is concerned.
Any plans to get into solar EPC infra projects?
Not as of now.
On the export opportunity - how do you see export revenue shaping up for FY26 given the challenges in US regarding trade tariffs?
We expect a material improvement going ahead every year. Under Project Spring, we have laid out guidance to increase the contribution of exports to overall revenue to 10% from the current 6% in FY25. The lower performance in FY25 was because we were going through our business model change in the US in the first half, but that is now complete and we have sales happening through the hybrid model. We don't see any material impact from tariffs - 10% tariffs are levied across all geographies which export to US. Post completion of the 90-day period, India tends to benefit because tariffs are relatively lower than other larger cable exporters from Asia. We are very confident that we should see very good growth in exports going ahead and should achieve the FY30 target under Project Spring.
Any pricing actions you have taken in the wake of copper movement YTD? And what is the FMEG margin guidance on a sustained basis?
On cables and wires, we pass on the changes in commodity prices on a monthly basis. In the previous quarter on copper as well as aluminum front, a mid-to-high single digit pass on of the increase in commodity prices was done, and again basis whatever changes have happened in this quarter, all those changes have been passed on. On FMEG, after almost 10 quarters we have seen a profitable quarter - this is a result of utilization improvement and product mix change in favor of higher margin products like switch gears, solar, conduit pipes. Going ahead, we expect to continuously see improvement in our margins towards our guided range of 8% to 10% of EBITDA margins by FY30.
On the export front - what is the profile of cables going in exports - specialized or normal power cables, and end user industry exposure?
It's a mix of both, but the higher proportion will be from low voltage and medium voltage cables, which has the maximum demand from across geographies. We also supply solar cables or cables which are used in other specialized end-industries depending on geography and projects. The larger contribution is from low voltage and medium voltage cables with smaller part coming in from specialized cables.
On the domestic front - what is driving the strong demand - LV/MV cables or HV cables?
Low voltage and medium voltage combined are almost 50% of the overall market, so the demand momentum there has the maximum impact. But high voltage and EHV cable demand is also pretty strong. Across all types of industry we have seen consistent good demand. Power industry has shown improvement, especially the transition to renewable energy sources is a very big opportunity. Real estate continues to do well. In-line with Project Spring guidance, we will target to grow cables and wires business at almost 1.5x of the industry growth and continue to gain market share.
On EPC - is the Rs. 70 billion order book only BharatNet, nothing from RDSS? And will BharatNet deliver same high single digit margin?
The Rs. 70 billion order book consists of two components - Rs. 40 billion is from RDSS projects and the remaining Rs. 30 billion is from the BharatNet scheme. The Rs. 40 billion of RDSS order book is to be executed over the next two to three years giving an almost consistent quarterly run rate of Rs. 5 billion. The BharatNet order from Bihar has a three-year execution period - the capex part is roughly Rs. 15 billion and the remaining is opex which will be accrued over 10 years after the completion of capex period.
On advertisement spend being down 24% this quarter - what is the normalized number going forward?
Couple of reasons - in Q4 generally we do advertisement before summer for fans, but summer is delayed this time so spends got delayed too (will reflect in Q1FY26). Last year we did a brand refresh and tied up with ICC as official partner for three World Cup events with materially higher spends. This year we are utilizing different mediums - digital and on-ground activities with retailers/distributors which are relatively lower costing. Going ahead, both above-the-line and below-the-line marketing activities will continue and each year you will see an increase in A&P spends for our B2C business.
On international business being down 24% - is it nothing to do with US tariff escalation?
On US tariff-related things, the end clients have no clarity on what situation will persist a couple of months down the line. So whatever orders we have received will continue to be executed - ongoing US projects wouldn't get delayed. We don't see any material change because of tariff-related announcements as far as demand from that geography is concerned. Post more clarity in two months, demand momentum should improve even further.
What is the contribution from US in our total exports for FY25 and FY24?
The contribution of US to our overall sales would be in high teens this year, last year it was very close to 40% (share of total exports).
On wires and cables sequential margin - what kind of product mix change drove the improvement?
If you look at sequential quarter Q3 and Q4, wires have done relatively better compared to cables, and since wires are of better margins, that led to an improvement in the margins of cables and wires segment.
So it's just more selling of wires and not really value-added products within wires/cables?
There would have been an improvement because of that as well, but it won't be something which will be material in nature. The largest improvement will be because of wires versus cables mix.
On FMEG with delayed summer affecting cooling - how is the secondary movement in the channel for your products?
We keep on receiving the benefits of all the execution steps that we've been taking. The delayed summer might have a bit of an impact on fan sales, but we have five other product categories which are also delivering very well. We don't expect there should be any material impact on their sales. We don't expect overall FMEG top line to be impacted as much on a yearly basis just because of whatever is happening right now.
Is the 11-13% margin guidance at EBITDA level and not EBIT level?
That's right, Aditya.
Given current 14-15% margins, why are we building in a sharp decline going forward - is the guidance conservative?
If you see how we have performed historically, our performance has always been able to outperform our guidance. On the longer-term basis, we always believe that 11% to 13% of EBITDA margin is something that can be consistently achieved in the cables and wires business. Wherever opportunity arises and there is possibility to improve through product mix or business mix, we will go for that. But longer-term guidance for us will always be 11% to 13% of EBITDA margins, which we believe is a sustainable margin range.
Have we already started seeing benefit from power generation orders awarded recently or is bulk yet to flow through?
This is going to be a consistent trend for the next many years. It is not something which is already behind us. We have seen an improvement in sales to the power generation side, but this will continue at least for the next few years. On green power, we have taken an aggressive target of reaching 500 GW of power generation through renewable sources and we are roughly at around 200 GW. Investments will continue for the next many years.
What's your capacity utilization during the quarter and full year? Comments on entry of new players? Any product launch in FMEG segment?
At an yearly level, we are somewhere between 70% to 80% utilization rate. Quarter 4 utilization goes up because of maximum demand - we will be north of 80% for the quarter. On new players entry, this reaffirms our thought process that this industry can grow at a very good rate and there will be acceleration in market share gain for organized players. Internally, we will double down on execution as part of Project Spring - capturing white spaces, working with distributors to generate leads, setting up five different verticals on institutional sales front.
Any new product launches in FMEG segment?
No, we are not looking at any new product launches in the near future.
How much of FY25 business came from RDSS-related project both cable supply and EPC?
On the EPC front, you can assume largely the entire sales for the year was from RDSS project scheme related awards. Roughly around 40% of the order value is the cable supply component, so that is the kind of cable sales part that we would have done through the RDSS orders.
On significantly superior margin profile (5-6% higher than peers in cables and wires) - how would you attribute this to pricing, mix, scale, efficiencies?
It will be a mix of all the reasons mentioned. One reason is the business mix - cables vs wires and the margins on those products. The pricing of our products is relatively higher - about 2% to 3% on cables side, about 4% to 5% on wires side. The margins in our exports business are also relatively much superior compared to peers. The mix within domestic cables - HDC vs LDC, with LDC being better margin business and we have a relatively better mix - also helps in the relatively superior margin we make in the cables and wires segment.