Polycab India Ltd Q2 FY2026 Concall Summary

Key Takeaways

• Strong quarter, broad-based growth: Consolidated revenue grew 18% YoY, led by a 21% YoY jump in Wires & Cables on high-teen volume expansion, while FMEG posted its third consecutive profitable quarter.
• Margins expanded sharply: EBITDA margin improved ~430 bps YoY to 15.8%, driven by operating leverage and a favourable business mix in the larger Wires & Cables segment.
• Project Spring is running ahead of plan: H1 growth has been 1.5x to 2x the industry rate with margins above the guided range, and the company raised its dividend payout ratio to 26.3%.
• A decade-old tax matter is fully resolved: The CIT(A) allowed all appeals, resulting in a NIL tax demand for assessment years 2014-2024, removing a long-standing overhang.
• What to watch next quarter: The pace of EPC revenue recovery as BharatNet execution begins, the sustainability of FMEG profitability through the post-monsoon period, and any tariff-driven disruption to US exports.

Wires & Cables: The Core Engine

• Domestic strength: The 21% YoY growth came despite a high base (28% YoY in the prior year), supported by higher government spending, improved project execution, and a favourable commodity environment. Both cables and wires performed strongly across distribution and institutional channels.
• Regional spread: Growth was led by the North, followed by West, South, and East.
• Margin mechanics: EBIT margins improved ~270 bps YoY to 15.1%. The QoQ improvement of ~40-50 bps is largely operating leverage; the YoY jump is a mix of operating leverage and gross margin expansion.
• Gross margin tailwind: Last year's September quarter saw a sharp copper spike in 3-4 days at quarter-end that heightened competitive intensity. This year the copper price increase was gradual, so competitive behaviour was different. Internal mix improvement, selling more Class 2/premium wires and better gross-margin SKUs in cables, also helped.
• No channel stuffing: Management pushed back on the idea that copper price rallies drove inventory buildup, stating fundamental demand remains strong. Pricing for distributors is revised monthly, and the uptrend in copper toward end-September was passed on in the first week of October.
• Hedging is for stability, not profit: The company uses hedging to maintain margin stability and will not deviate from that approach regardless of copper, aluminum, or USD-INR movements. It can sometimes help and sometimes decrease margins.

Upadhyaya: "We don't believe that the high-volume growth that we are witnessing this year has anything to do with the copper movement. I think the fundamental demand remains quite strong."

FMEG: The Turnaround Story

• Third consecutive profitable quarter: Profitability held despite an increase in A&P spends, helped by a focus on premiumization and operating leverage.
• Category-level dynamics: Fans faced headwinds from a prolonged monsoon and elevated channel inventory, registering marginal degrowth. Lighting gained traction from festival demand. Switches, switchgears, and conduit solutions saw healthy demand from real estate. Solar products were the standout performer, driven by central and state solar rooftop incentive schemes.
• Where the drag sits: Fans are the loss-making category because utilization rates are low, hampering operating leverage. Solar, switches, switchgears, and conduits are all profitable.
• The 8-10% margin path: Three levers to reach the FY2030 target: scaling up fans to improve operating leverage, gross margin expansion via premiumization across categories, and increasing the contribution of higher-margin products like switchgears and switches.
• Why in-house manufacturing: Management cited three reasons: quality control to protect the Polycab brand, better availability versus outsourcing risks, and raw material synergy (copper, steel, plastic) with the cables & wires business, leveraging scale to lower FMEG costs.
• Etira gaining traction: The Etira brand, aimed at Tier 2/3/5 cities to compete with unorganized players, is seeing good traction in Class 2 wire sales, which is improving wire segment margins. Suprema and Primma serve the premium metro/Tier 1 segment.

Upadhyaya: "We didn't want to dilute our brand name when we sell the FMEG products."

EPC & International: The Other Growth Legs

• EPC revenue declined, but profitability held: Revenues fell 19% YoY to ₹402.4 crore due to the project execution cycle. Reported profitability of 18.1% includes a one-time gain of ~₹30 crore from a change in terms in one contract; excluding that, margins were ~10%, consistent with mid- to long-term guidance.
• H2 recovery expected: The second half should see better revenue inflow from the RDSS project due to the cable supply portion. BharatNet project execution will start from Q3 onwards, adding to both the top line and bottom line.
• International steady at 25% growth: Exports grew 25% YoY in H1 FY2026 and contributed 6.5% to consolidated revenue. The relative decline in export contribution is due to stronger domestic growth. A healthy order book supports continued momentum.
• No pre-stocking in exports: Unlike peers, Polycab exports through institutional channels, not distributors, so no pre-stocking occurred due to tariffs or copper movements. Exports were pure order-book execution.
• US exports uncertain: Management finds it very difficult to comment on the US outlook, as it depends on tariff negotiations expected to resolve by end of November.

Upadhyaya: "It is very difficult to comment as of now as far as the U.S. is concerned."

Project Spring & Capital Allocation

• Running ahead of guidance: Growth in the first two quarters since launch has been 1.5x to 2x of the industry growth rate, with margins above the guided range. FMEG is outpacing industry growth at 1.5x to 2x the market rate.
• Capex plan: ₹1,200 crore to ₹1,600 crore annually through FY2030. Incremental revenue potential from capex is 4x to 5x turn, with a lag of 1.5 to 2 years. Capacities are largely fungible between wire and cable types.
• EHV plant on track: No delay in acquiring technicians for vertical lines; commissioning is on schedule, expected by the end of the next calendar year. Benefits from EHV sales are likely in FY2028.
• Dividend payout rising: Raised to 26.3% from 25.5% last year, with a goal of crossing 30% by FY2030.
• Defense as a new growth vertical: Over the last 2-3 years, the company has developed products and secured approvals for defense cables. It is now consistently supplying and is an approved player, with the segment expected to be fast-growing.
• SPC vertical outlook: Defense, automobiles, and railways (coaches) form the SPC vertical. It can be one of the fastest-growing verticals given government investments, but management declined to quantify its contribution five years out.

Competitive Landscape & Pricing

• Pricing premium intact: The pricing premium versus competitors continues as is, with no material change expected in the near-to-mid term.
• New entrants on the horizon: One player has given plans for entry in 1 to 1.5 years, focused largely on wires. Management noted that wires is already oversupplied and Polycab has grown and gained share in that environment; it will compete as needed.
• BEE rating change for fans: No price cuts seen as of now; in the previous quarter the industry actually took price hikes. The previous BEE change roughly 1 year 9 months ago did not cause pressure.
• HVDC not a near-term play: Management is not pursuing HVDC now, citing very limited projects in India and no domestic player with the technology. It may develop or acquire technology in the next few years for a longer-term opportunity spanning a decade or two.

Upadhyaya: "The guidance of 11% to 13% of margins is a 5-year guidance. It is not something that we believe will be the case immediately next quarter or the quarter after that."

Guidance & Commitments

Key Metrics