Polycab India Ltd Q3 FY2025 Concall Summary

Key Takeaways

• Guidance delivered early, new roadmap set: Calendar year 2024 top-line hit ₹21,000 crore, a 5% overachievement of the FY26 target a year ahead of schedule, and management launched "Project Spring," a five-year plan through FY30.
• Wires & cables margin normalized: Segment EBIT margins rebounded ~120 bps sequentially to 13.5% as the wires business recovered from a commodity-led destocking shock, while international business contribution inched above 8%.
• FMEG turned the corner on losses: The segment grew 45% YoY and losses were arrested through gross margin expansion and operating leverage, with management targeting 8–10% EBITDA margins by FY30.
• Capex cycle is material and front-footed: The company plans ₹6,000–8,000 crore of capex over five years, mostly for wires and cables, betting that industry demand will exceed capacity coming online.
• What to watch next quarter: Whether the anticipated wires sales rebound materializes as channel inventory normalizes, any clarity on the U.S. tariff opportunity for Indian cable exports, and the specific export go-to-market model decision expected by end of Q4.

Project Spring: The FY30 Roadmap

• Overachievement sets the stage: Project LEAP's ₹20,000 crore top-line target was met with calendar year 2024 revenue of ₹21,000 crore, a year ahead of the FY26 deadline. The new plan, Project Spring, runs through FY30 and rests on six pillars: solidifying B2B market leadership, propelling B2C expansion, ramping up international business, innovation and automation-led development, nurturing talent, and growing ESG integration.
• Wires and cables growth ambition: The domestic business is targeted to grow at ~1.5x the industry growth rate, with the industry itself expected to expand at 1.5x to 2x of real GDP. Sustainable EBITDA margins for the segment are guided at 11% to 13%.
• International business target: Share of international revenue is targeted to rise to north of 10% of the overall company top-line, though management acknowledged the capacity and opportunity exist to take it closer to 20% depending on how variables play out.
• FMEG aspirations: The segment is targeted to grow at 1.5x to 2x of market growth, which management pegs at 8–10%, with the goal of becoming a top-3 player across product categories and achieving 8–10% EBITDA margins by FY30.
• Capital allocation framework: ₹6,000–8,000 crore of capex is planned over five years, mostly for wires and cables, with expected asset turns of 4x to 5x. The dividend payout ratio is targeted to gradually increase to greater than 30% by FY30 from the current 26.5%, and unutilized cash will be available for inorganic opportunities.
• Structural tailwinds baked in: Management cited government public capex acceleration, real estate sector strength, anticipated RBI rate cuts in 2025, and private capex projected to rise from 14% to around 20% of GDP as the macro foundation for the plan.

Tongia: "The timing of Project Spring is very important, as unlike during the inception of Project LEAP, we are now fully aware and in between an infrastructure upcycle in the country. And in that sense, what we do within Project Spring over the next 5 years will set the foundation for the long-term growth of the Company as we work to set up the Company to achieve multi-decade growth, along with the government's Viksit Bharat 2047 vision."

Wires & Cables: Destocking Shock and Recovery

• The Q3 destocking mechanics: The prior quarter saw a sharp commodity price rise that drove distributors to stock up, producing ~40% wires top-line growth and elevated channel inventory. In Q3, copper trended continuously downward and crashed ~9% in four to five days during November, causing distributors to slow offtake materially. Management characterized this as a one-off, commodity-movement-led event, not a demand problem.
• Cables demand resilient: Domestic cables demand remained healthy and has not yet seen an impact from the public capex slowdown of the first three to four months of the year. The cables mix within the segment has shifted north of 75%, with cables volume growth year-to-date in double digits while wires is in single digits.
• Rebound expected in Q4: Channel inventory is now at normalized levels, copper has returned to an inflationary trend, and fundamental demand is intact, so management anticipates a wires sales rebound during Q4 FY25.
• Industry capacity dynamics support pricing: The top four to five large players hold ~60–70% market share and have the capacity to invest; smaller players likely cannot add as much capacity. Management's view is that demand will exceed the capacity coming online, with exports and wires demand providing additional avenues for utilization. No overcapacity or even capacity matching demand is expected.
• E-beam technology niche: Polycab has utilized e-beam technology for over two decades and was a pioneer in India, initially for special-purpose cables in niche industries. It recently began using the technology for wires manufacturing; the market is small but growing at a good pace as larger players and developers embrace it.

Upadhyaya: "As of now, the thought process is that the demand will exceed the capacity."

International Business: Exports Surge and U.S. Optionality

• Strong quarter, broad-based geography mix: International business grew 62% YoY, with robust demand across three to four major geographies: the U.S., Middle East (strong cable demand), Europe, and Australia. Asia's contribution is lower but the company is working to enter more countries there. One new geography was added in Q3, bringing the total to 81 countries.
• U.S. tariff opportunity emerging: If the U.S. implements a 25% import duty on Mexico, the pricing differential between Indian cables (facing 3–5% import duty) and Mexican cables (currently at 0% duty) would shift in favor of India, potentially leading to market share gains for Indian players. Management expects more clarity over the next one to two months.
• Export model decision pending: The company is still deciding which go-to-market model, distribution or institutional, to pursue for U.S. exports. A specific answer is expected by the end of Q4 or shortly thereafter.
• Exports growth to outpace domestic: Export growth is expected to be faster than domestic growth, though the percentage contribution increase will not be rapid given the expanding domestic base. Management left the target as "greater than 10%" but noted the ability exists to take it closer to 20%.
• Strategic, margin-focused approach: Exports are treated as a strategic business focused on margin improvement, not volume for its own sake. The addressable U.S. market spans thousands of SKUs, and Polycab will not cater to all of them. Management declined to quantify what percentage of the total U.S. addressable market it currently has approval for, calling it very difficult to pin down.

Upadhyaya: "And hence, while exports growth will definitely be faster than domestic growth, the percentage contribution increase can't be at a very rapid pace. And that is where we've left it as saying that it will be greater than 10%. As far as capacity is concerned or opportunity is concerned, we have the ability to take it even closer to 20%, but we'll have to see what are the other variables and how they play out."

FMEG: Losses Arrested, Growth Inflecting

• 45% YoY growth on a lower base: The segment was driven by channel expansion, product architecture enhancements, and an influencer management program. Fans grew both YoY and sequentially. Lights and luminaires registered strong volume and value growth after several quarters of decline, supported by 130+ new SKUs, expansion into 500+ towns, ~150 new distributors, and ~7,000 retailers added during the year. Switchgears, conduit pipes and fittings, and switches continued healthy growth supported by strong real estate demand.
• Losses curtailed: The improvement came from gross margin expansion and enhanced operating leverage as sales scaled. Management expects demand to accelerate further in coming years due to the robust real estate sector and sustained execution of strategic initiatives.
• Rooftop solar tailwind: The Surya Ghar Yojana scheme has driven significant traction over the past year, with Polycab supplying solar cables, inverters, and panels. This business has been doing very well over the past two to three quarters and is continuously increasing its contribution within the FMEG segment.
• Lighting sustainability question open: Q3 benefited from the Diwali festival, but beyond that, geographic expansion, distributor and retailer tie-ups, and incentive schemes are working. Pricing erosion is still ongoing, though the pace has slowed, and premium SKUs may also face erosion going ahead. Management said it is difficult to predict whether the business will continue to deliver very healthy volume and value growth continuously.
• No new categories planned: The company will continue with existing FMEG product categories and does not plan to add any new ones in the near future. Regional expansion is focused on gaining prominence in the North, South, and East through distribution expansion, more retail outlets, and product availability at specific price points.

EPC: Order Book Provides Visibility

• Revenue more than doubled: EPC revenue reached ₹457.3 crore, up 111% YoY, with profitability up 37% YoY and segmental margins at 11.3%. The growth was driven by execution of the existing order book.
• Run rate visibility for two years: From the ₹4,800 crore order book, management expects a similar quarterly run rate to continue over the next two years. The BharatNet order will start contributing from FY27 onwards, and EHV orders will also contribute to EPC from FY27.
• Contribution to remain modest: The segment's contribution to consolidated top-line is expected to stay in the mid- to high single-digit range, and EPC is not expected to become a very large contributor to overall company revenue. Annual sustainable operating margins are expected to be in the high single digits over the medium to long term.

Margins and Financials

• EBITDA margin walk: Consolidated EBITDA margins improved ~70 bps YoY and ~230 bps QoQ to 13.8%. The sequential improvement was driven by normalization in wires and cables margins as wires margins reverted to normal from the prior quarter's lows, international business contribution inching above 8%, and FMEG losses being arrested. This was partly offset by moderation in EPC business margins.
• Wires and cables EBIT margins: Improved ~120 bps sequentially to 13.5%, reflecting the normalization after the commodity-led disruption.
• Exchange loss absorbed: A ₹31-odd crore mark-to-market loss on foreign exchange was booked in Q3, linked to the rapid and sharp depreciation of the rupee. The negative impact is already apportioned within segmental EBIT margins.
• Long-term margin guidance conservative by design: Management guided sustainable EBITDA margins of 11% to 13% for wires and cables in the long term. In the near to midterm, depending on product and business composition, the company may continue to operate at the high range it is currently at, but management will not commit that similar scenarios will exist five years down the line. The stated endeavor is to overdeliver on that guidance.
• Highest-ever Q3 PAT: Profit after tax reached ₹464.3 crore, with a PAT margin of 8.9%.

Upadhyaya: "But at this point of time, I wouldn't want to commit that 5 years down the line, similar scenarios will exist. So if it exists, obviously, we will try and our endeavour will be to continue to overdeliver on that guidance. But as of now, the guidance will be to deliver 11% to 13% of EBITDA margins in the long term."

Guidance & Commitments

Key Metrics