Polycab India Ltd Q1 FY2026 Concall Summary

Key Takeaways

• Record Q1, margin surprise: Highest-ever Q1 revenue and profitability, with EBITDA margin expanding 210 bps YoY driven by strategic pricing and a favorable business mix shift toward higher-margin Cables & Wires.
• Wires & Cables is the engine: Domestic W&C grew 32% YoY, powered by a sharp pickup in government capex and supportive copper prices, while cables outpaced wires in growth.
• FMEG turns a corner: The business delivered its second consecutive profitable quarter, with solar now the largest category and premiumization lifting margins across fans, lighting, and switches.
• Tariff overhang on exports: Management calls the U.S. tariff situation "an overhang" impacting near-term visibility, even as it sees a large long-term opportunity and notes India's current tariff advantage.
• What to watch next quarter: Whether the government capex momentum sustains through the monsoon, the pace of FMEG margin improvement toward the 8-10% FY30 target, and any clarity on how U.S. tariff policy affects export order flow.

Wires & Cables: The Growth Engine

• Government capex unlocked demand: Government capex averaged ₹1.26 trillion/month since December 2024, nearly double the ₹0.64 trillion/month run-rate of April-November 2024, translating into cable demand with a lag.
• Cables outpaced wires: Low-voltage and medium-voltage categories, where Polycab has its largest presence, drove the growth; both distribution and institutional channels performed well, with the South leading regionally, followed by North, East, and West.
• Residential wire demand from smaller cities: Tier 3-5 cities are seeing a pickup in affordable housing, which is translating into improved wire demand, with the Etira brand increasing its contribution to wire sales.
• Commodity tailwind managed well: Copper price volatility was lower than in the prior 3-4 quarters, and prices moved in one direction after the first five days, making pricing transfers simpler and allowing the company to maximize the benefit from commodity price movements.
• Market share moat: Management attributes share gains to having capacity, the largest set of approvals, and the largest bouquet of SKUs in Cables & Wires.
• Capacity expansion will pressure near-term margins: Investing in capacity expansion is bound to lower operating margins in the near to midterm, offsetting some of the profitability improvement from mix and exports.

Upadhyaya: "When you are investing a lot in terms of capacity expansion, that is bound to have an impact in terms of lower operating margins in the near to midterm. So that will take a bit of a sheen off of the improvement in profitability that we might see because of the other two parameters."

FMEG: Profitable and Premiumizing

• Second consecutive profitable quarter: Margin expansion was driven by better product mix and operating leverage from scaling efficiencies across all FMEG product categories.
• Solar becomes the largest category: Solar grew more than 2x YoY and is now the largest contributor within the FMEG portfolio, backed by the government's rooftop solar scheme and state-level incentivization programs.
• Only 20% of the government scheme has taken off: Management expects continuous demand for solar inverters for at least the next few years, with significant runway remaining from the central scheme alone, plus additional state-level schemes in place.
• Premiumization is working: Premium fans now make up ~25% of fan sales, premium lighting products are over 35% of lighting sales, and the Levana premium switch line is at ~20% of total switch sales, all helping improve gross margin realization.
• E-commerce gaining share: E-commerce now accounts for a mid-teens share of total fan revenues.
• Fans muted by weather: Overall fan sales were subdued due to a shortened summer and early monsoon, which also kept advertising spends low during the quarter; ad spends will increase with the festive season.
• Project Spring targets intact: The company is targeting 1.5x to 2x of industry growth for FMEG and improving EBITDA margins to the 8% to 10% range by FY30, with demand expected to pick up as real estate projects reach the finishing phase.

Upadhyaya: "We believe the demand is going to be very sacrosanct at least in the near to midterm. The government scheme is there, and yet, I think only 20% of that has taken off."

Exports: Opportunity Meets Tariff Uncertainty

• Organic growth in Q1: Export growth was organic, driven by execution of multiple orders across geographies, not by the single rolled-over order which will be executed over the entire year.
• U.S. tariff overhang: Management acknowledged the tariff situation is "kind of an overhang" that impacts near-term visibility, but sees a very large long-term opportunity and notes India currently stands at a 10% tariff, which favors India relative to other exporting nations.
• Europe is not pro-China: End customers in Europe are willing to pay a premium for non-Chinese alternatives despite lower Chinese prices, creating an opening for Indian suppliers.
• Middle East advantage: India enjoys a better tariff position in Saudi Arabia, reducing Chinese competition in a market with huge cable demand from infrastructure investments.
• Australia is tougher: China has a zero-tariff treaty with Australia, so most imports come from China; Polycab must compete on pricing and service terms there.
• Power infrastructure upgrade cycle: U.S. and European power infrastructure is 60-70 years old and requires upgrades irrespective of energy source, generating sustained cable demand; data center investments for AI will also require large quantities of power cables and optical fiber cables.

Upadhyaya: "Definitely, the tariff situation over there is kind of an overhang, which kind of impacts the visibility in the near term. But in the longer term, it's a very, very big opportunity."

EPC & BharatNet: A Managed, Capped Contributor

• EPC revenue declined 19% YoY to ₹347.4 crore, with profitability at ₹26.8 crore and a 7.7% margin; the open order book remains healthy.
• Revenue is lumpy by design: EPC revenue varies quarter-to-quarter because different project phases carry different margin profiles: material-supply quarters have better margins, execution quarters have softer margins, and it averages out over a full year.
• BharatNet wins: Polycab won two orders out of the 16 tenders that opened, with both projects together carrying ~₹8,000 crore outstanding (capex plus overall); execution will begin from the second half of this year.
• BharatNet margins: Management expects 12% to 14% EBITDA margins from the BharatNet piece, while RDSS orders carry a high single-digit margin profile.
• EPC contribution ceiling: Management does not see EPC contribution going materially above 10% of overall revenue, given strong demand in cables and wires and FMEG growth.
• RDSS pipeline active: New RDSS tenders have opened and Polycab has bid; the scheme runs till the end of FY26, with more tenders yet to open, and the company will participate where comfortable.

Upadhyaya: "I don't see the contribution of EPC going materially above 10%."

Margins: Strong Quarter, Long-Term Guardrails

• EBITDA margin expanded 210 bps YoY: The improvement was supported by strategic pricing actions, operational efficiencies, and a favorable business mix with lower EPC contribution and higher Cables & Wires contribution versus Q1 FY25.
• W&C EBIT margin improved 190 bps: Better operating leverage and strategic pricing actions drove the expansion.
• Long-term margin guidance reaffirmed at 11-13%: Management reiterated that over the longer term, 11% to 13% EBITDA margins for Cables & Wires is what the company will generate irrespective of business type, procurement, or commodity prices.
• Why not raise guidance? When asked why guidance is not reset higher given consistent outperformance (14.7% this quarter), management pointed to the 5-year horizon of the guidance and the near-to-midterm margin drag from capacity expansion investments, without directly addressing the sustainability of current margins.
• Hedging policy unchanged: The company continues to hedge, with 90% of distributor sales lacking an order book, making hedging necessary to avoid commodity price risk; management described the policy without clarifying whether it was applied differently this quarter.

Upadhyaya: "In the longer term, 11% to 13% of EBITDA margins is what we will be able to generate irrespective of what happens on what type of business or procurement or commodity prices irrespective of that."

Capital Allocation & Capacity

• Capex of ₹1,200-1,600 crore annually through FY30: Under Project Spring, total capex will be ₹6,000 crore to ₹8,000 crore over five years, with most allocated to the Cables & Wires business.
• No immediate FMEG capex needed: Incremental FMEG capex is likely only toward the mid-to-end of the next five years.
• Extra high voltage revenue is FY28 at the earliest: The plant must first be commissioned, then tenders bid and won, so meaningful revenue accrual will only happen in FY28.
• No international manufacturing in the near to midterm: Management has no plans to set up manufacturing plants outside India in the near to midterm, though over the next decade or two the company will have to consider it.
• Working capital to normalize: Working capital days stood at 43, positively impacted by a temporary increase in payable days; this is expected to normalize to 50-55 days in coming quarters.

Upadhyaya: "In the near to midterm, we don't have any plans of setting up manufacturing plants outside India... longer term, maybe next decade or a couple of decades, probably that is where we'll definitely have to think about going outside India, but not required in the near to midterm."

Guidance & Commitments

Key Metrics