Polycab India Ltd Q4 FY2025 Concall Summary

Key Takeaways

• Record quarter, record year: Revenue grew 25% YoY, EBITDA grew 35% YoY, and PAT hit an all-time high of ₹730 crore, making Polycab the largest company in the Indian electrical industry by revenue.
• FMEG turns the corner: The FMEG business turned profitable in Q4 after ten quarters of investment, contributing to a ~110 bps YoY EBITDA margin expansion to 14.7%.
• Cables & wires margin jumps sequentially: A 140 bps QoQ EBIT margin improvement to 15.1% was driven by operating leverage and a favorable mix shift toward higher-margin wires.
• Export dip is timing, not demand: International revenue fell 24% YoY due to a large order rollover and a US business model change now complete; management sees no material tariff impact and is confident of strong growth ahead.
• What to watch next quarter: Whether FMEG sustains profitability after its first profitable quarter, the pace of export order book conversion, and any update on the ₹4,100 cr BharatNet package where Polycab is the lowest bidder.

Wires & Cables: The Core Engine

• Domestic strength: Domestic cables and wires grew 27% YoY in Q4, with volume growth in the mid-teens; cables grew in the higher teens while wires grew in the high single digits. Full-year volume growth was also mid-teens, aligned with the 1.5x to 2x real GDP growth target.
• Sequential margin story: The 140 bps QoQ EBIT margin expansion to 15.1% came from operating leverage and product mix: wires grew faster than cables sequentially, and wires carry higher margins. International business underperformance partially offset the gain. No one-offs or inventory gains were involved.
• Pricing power: Polycab commands a 2-3% price premium on cables and 4-5% on wires versus peers, which management cites as a structural margin advantage alongside business mix and superior export margins.
• Market share gains: Domestic organized market share in wires and cables rose to 26-27% from 25-26% in FY24. Management expects continued gains by doubling down on execution, capturing white spaces, and working deeply with distributors to generate leads.
• Power generation demand rising: Sales to the power generation side have improved and management expects this trend to continue for several years, with India at roughly 200 GW of renewable capacity against a 500 GW target. Participation in power transmission is expected to begin within a few quarters.

Upadhyaya: "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, and hence when we comment on guidance, we always give something that is achievable by us."

FMEG: The Turnaround Quarter

• Profitability achieved: FMEG turned profitable in Q4 FY25 after ten consecutive quarters of sustained strategic investments in talent acquisition, driven by improved manufacturing plant utilization and favorable product mix.
• Fans lead despite delayed summer: The fans segment recorded impressive growth even with the delayed onset of summer, reflecting the success of the premiumization strategy. Over 100 new SKUs were launched, geographic reach extended to over 350 new towns, and 280 channel partners plus 8,000 retailers were added during the year.
• Solar scales fast: The solar product business grew nearly 2.5x over the year and is now the third-largest category within FMEG, driven by PM Surya Ghar Yojana, state-level subsidies, and rising renewable energy awareness. No plans for in-house inverter manufacturing or solar EPC; the outsourcing model will continue.
• Lighting and switchgear momentum: Lighting launched over 200 new SKUs, expanded to approximately 700 towns, and onboarded 170+ partners and 11,500 retailers. Switch gears, conduit pipes and fittings, and switches all delivered healthy growth supported by real estate and construction momentum.
• No new categories planned: Management stated they are not looking at any new product launches in the near future, focusing instead on scaling existing categories.

Exports: Reset and Rebuild

• Q4 dip explained: International business declined 24% YoY due to the rollover of a large order into the next quarter, not demand weakness. The US business model change completed in H1 is now behind the company, with a hybrid model in place.
• Tariff stance: Management sees no material impact from current US tariffs; the 10% levy is status quo versus a couple of months ago, and India may benefit as its tariffs are relatively lower than other Asian cable exporters. All current orders from that geography have passed on tariff cost increases.
• Structural rebuild underway: Three separate divisions are being set up within exports (OEMs, distributors, EPCs) with dedicated teams. Five new geographies were added in FY25, and the company has charted target geographies and lists of EPC contractors and end clients to pursue.
• Project Spring target: Export contribution to overall revenue is targeted to rise from 6% in FY25 to 10% by FY30. Management expressed high confidence in achieving this, with a healthy order book from the Middle East, Europe, and Australia.

Upadhyaya: "We don't see any material impact as of now because of the tariffs which are being levied. As of the current status, 10% tariffs are levied across all these geographies which export to US and that means it's status quo as compared to what it was a couple of months back."

EPC & BharatNet: The Infra Optionality

• EPC surges: EPC revenues reached ₹602.8 cr, up 47% YoY, with profitability up 171% YoY driven by strong execution of the RDSS order book.
• BharatNet win: An agreement was executed with BSNL for the Design, Supply, Construction, Installation, Upgradation, Operation and Maintenance of the Middle-Mile Network of BharatNet in the Bihar Telecom circle, amounting to ₹3,000 cr (inclusive of GST).
• Pipeline visibility: Polycab was declared the lowest bidder in the Goa, Karnataka and Puducherry package with a capex order of ₹4,100 cr (inclusive of GST); agreement execution is expected to complete soon.
• RDSS beyond FY26: The scheme currently runs until FY26; management will wait to see if the government extends it and will participate if it does, but gave no commitment or outlook.

Margins, Costs & Capital Allocation

• Consolidated margin walk: EBITDA margin expanded ~110 bps YoY to 14.7%, driven primarily by the FMEG turnaround and improved EPC margins from a low base and better execution discipline. Sequentially, margins improved ~90 bps.
• Working capital normalizes: Working capital improved to 49 days in Q4 due to a temporary reduction in inventory days as some raw material purchases are in transit; it is expected to return to the 50-55 day range on a normalized basis.
• Capex at record levels: Annual capex reached almost ₹1,000 cr for the first time in history, with Project Spring targeting ₹6,000 to ₹8,000 cr over the next five years. Capacity utilization runs at 70-80% annually, with Q4 at the high end due to peak demand.
• Dividend step-up: A dividend of ₹35 per share was proposed, with a payout ratio of 26.3%, a step toward the Project Spring target of 30% by FY30. Net cash increased to ₹2,460 cr.
• Margin headwinds to watch: While higher export mix should help margins, capacity expansion (initial low utilization), advertising and promotion for the B2C business, and rising R&D and innovation investments could offset. Management remains confident of delivering within the 11-13% cables and wires EBITDA margin range.

Upadhyaya: "Definitely, since exports business is a relatively higher margin business and if the mix improves, definitely that should help as far as the margins are concerned. But we should also look at the other variables... we have given a guidance of 11% to 13% and we are reasonably confident that we should be able to deliver within those margin guidance."

Guidance & Commitments

Key Metrics