Polycab India Limited (POLYCAB.NS) Earnings Call Transcript & Summary

Ladies and gentlemen, good evening, and welcome to the Polycab India Limited Q3 FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Niyant Maru, Chief Financial Officer, Polycab India Limited. Thank you, and over to you, sir.

Thank you. Good afternoon, everyone, and thank you for joining us today. I hope all of you are staying healthy and safe. I am Niyant Maru, CFO at Polycab India Limited. On today's call, we will be discussing the Q3 FY '26 results, which were approved by the Board of Directors earlier today. We will be referring to the earnings presentation, financial results and financial statements, all of which are available on the stock exchanges and on the Investor Relations section of our website. Joining me today from the management team are Shashank Yagnick, Head Strategy; Chirayu Upadhyaya, Head Investor Relations. Before we get into quarterly performance, I would like to share a very important update announced at the Board meeting today. It gives me immense pleasure to inform you that the Board of Directors at its meeting held today has approved the redesignation of Mr. Bharat Jaisinghani and Mr. Nikhil Jaisinghani from Executive Directors to Joint Managing Directors of the company with immediate effect subject to approval of the shareholders. Over the years, Bharat and Nikhil have played an integral role in shaping the company's growth trajectory, strengthening the market leadership and building a strong foundation for a long-term value creation. The understanding of the business and hands-on leadership have been key contributors to the company's success. I'm confident that in the enhanced role as Joint Managing Director, will continue to provide strong leadership and guidance and work closely with the Board and the management team to steer the company towards sustained growth and newer milestones in the years ahead. With that, let me now take you through the macro environment. On macro environment, the year 2025 marked a pivotal phase for the global economy defined by shifting trade dynamics and heightened geopolitical and tariff related uncertainties. Elevated U.S. tariffs disrupted the established supply chain and moderated global growth, even as labor market remains resilient and inflationary pressure is across the major economy. Against this backdrop, the global economy is expected to grow at around 3.2% in 2025, reflecting a period of stabilization amid persistent trade tensions. Overall, the global environment in 2025 has been characterized by steady but uneven growth, improving inflation dynamics and cautious monetary easing across regions. India continues to stand out as a clear outperformer in this global landscape, demonstrating remarkable resilience and deductibility. With Q2 FY '26 GDP growth at 8.2%. India continues to be the fastest-growing major economy, underscoring the strength of its internal growth engines. In November 2025, India overtook Japan to emerge as the fourth largest economy globally, reaching a GDP of USD 4.19 trillion. Domestic consumption has witnessed a notable revival following last year's direct and indirect tax. Credit growth has strengthened meaningfully with total credit uptake, reaching INR 11 trillion in November '25 compared to INR 9.5 trillion last year. 2-wheeler sales also increased by 18.1% year-on-year over the September, November period, while passenger vehicle sales rose by 7.3% during the same time frame, reflecting improving confidence among consumers and businesses alike. Encouragingly, this recovery has occurred alongside a continued moderation in inflation. Headline inflation has trended lower, led by easing food prices, while lower global energy prices have provided additional relief. Despite currency depreciation during the fiscal year, the pass-through to inflation has remained limited. inflation across both goods and services has stayed relatively benign. Favorable macro backdrop, the RBI delivered a 25 basis point policy rate cut, revising its growth forecast upwards to 7.3% for the year and lowering inflation projection to 2%. For the next fiscal year, first half inflation expectation will revise downwards to 4% compared to 4.5% earlier. The rare combination of strong growth and softer inflation enabled the Monetary Policy Committee to proceed with the rate cut, taking cumulative easing to 125 basis points during the calendar year. Investment activity has also gathered momentum utilization strong investment announcements and improving credit offtake points to a broad-based recovery in economic activity and increasing job creation. The real estate sector remains healthy with launches and sales across the top 7 cities closely tracking the previous decade high. The affordable housing segment is also witnessing renewed momentum supported by lower borrowing costs and rising household incomes. At the same time, government capital expenditure has accelerated meaningfully with approximately 59% of the FY '26 CapEx outlay already utilized by November 2025, a 28% year-on- Overall, we are witnessing signs of recovery in consumption and this improving demand environment is expected to translate into a revival in private CapEx complemented by sustained public investment, providing strong confidence in India's growth outlook. I would now hand over to Shashank to take you through the financial performance for the quarter and the year.

Thank you, Niyant. Let me now take you through Slide 4 of the earnings presentation. For the quarter ended 31st December 2025, we are pleased to report that our company delivered 46% year-on-year growth in consolidated revenues, driven by strong execution in the Wire and Cable segment and healthy growth in the FMEG business. EBITDA for the quarter grew by 34% year-on-year with EBITDA margins at 12.7%. Excluding the one-off impact of INR 219 million on account of gratuity provisioning due to the implementation of the new labor code, the EBITDA margins would have been approximately 14%. At the PAT level, the company delivered its highest ever quarter 3 PAT at INR 6.3 billion, reflecting 36% year-on-year growth. PAT margins stood at 8.3% for the quarter. Finance costs came in at INR 687 million, while other income stood at INR 505 million. A detailed breakdown of these line items is available on Slide 17 of the present. We continue to maintain a strong balance sheet, closing the quarter with a net cash position of INR 30.3 billion. On working capital front, same as last quarter, inventory days continue to be higher as we built up inventory in anticipation of strong demand in quarter 4 FY '26. And correspondingly, given the use of letters of credit for raw material procurement, payable sales were also higher, resulting in the working capital cycle to be at 27 days at the end of quarter 3 FY '26. We expect this to normalize to our long-term steady range of 50 to 55 days in the coming quarters. Capital expenditure for the quarter was INR 3.4 billion, taking the 9-month FY '26 totaled to INR 10.9 billion, and this is in line with our Project Spring guidance of investing INR 12 billion to INR 16 billion annually through FY '30. On a 9-month basis, I'm proud to share that 9 months FY '26 revenues, EBITDA and PAT are the highest ever in the company's history for any 9-month period. Revenues grew 30% year-on-year to INR 200 billion milestone. EBITDA grew 47% year-on-year, with margins strong at 14.2%. PAT grew 47% year-on-year with PAT margins of 9.6%. We now move to Slide 6. The Wires and Cables business delivered very strong performance, recording 53% year-on-year revenue growth during the quarter. This growth was led by domestic wire and cable business, which posted an exceptional 59% year-on-year growth, supported by robust demand conditions and sustained commodity price inflation. In volume, the domestic wire cable business recorded nearly 40% growth, reflecting healthy underlying demand. This strong performance underscores a further strengthening of our market position with continued market share gains in the domestic market during the quarter. Execution excellence under Project Spring remains a key enabler driving superior market execution, improved relationships with our channel partners and consistent outperformance. During the quarter, wins growth outperformed cables, driven by pre-stocking by channel and partners amid elevated copper prices. Within the cable segment, institutional sales growth outpaced the channel sales, reflecting strong traction in project-led demand. Looking at the product environment, demand remains robust across 3 sectors. Government CapEx surged nearly 28.2% year-on-year in the first 8 months of FY '26 reaching INR 6.6 trillion versus INR 5.1 trillion last year, also 12.4% higher than in the 8-month period in FY '24. Additionally, the government of India released a loan of INR 1.25 trillion to states for capital expenditure during the same period. The private CapEx cycle in India is showing signs of recovery aided by the monetary policy support and the stimulative impact of CST carton consumption laying the foundation for sustained investment growth. The real estate market remains strong following last year's record sales and launches a trend that should continue to support wide demand in the coming years. Our international business maintained its steady momentum, recording a 5% year-on-year growth during the quarter despite the high base and contributing 6% to the consolidated revenues backed by a healthy order book, we remain confident that this growth trajectory will continue in the coming quarters. Segment profitability was impacted during the quarter due to multiple factors, primarily on account of continued commodity price inflation and depreciation of the Indian rupee. Between September 2025 and December 2025, copper and revenue prices in rupee terms increased sequentially by approximately 21% and 11%, respectively, which represents an unusually sharp escalation over a short period of time. In order to avoid demand disruption, arising from elevated input costs. The company took a strategic decision to pass on the increase in raw material prices in a staggered manner. While this approach resulted in near-term margin pressure at the company level, it enables us to protect volumes gain market share and further strengthen relationships with our channel partners. Moving on to Slide 8 for an update on the FMEG business. The SME segment sustained its impressive growth momentum, delivering a 17% year-on-year increase in quarter 3 FY '26 and consistently outperforming the industry in line with the project spring growth aspirations. Within the segment, the solar business has been a standard performance, growing more than 2x compared to the same quarter last year driven by strong uptake on the central and state group top solar incentive scheme. With favorable support and strong demand visibility, we expect this momentum to continue in the coming quarters. Other product categories delivered steady in line formats, reinforcing the segment's balanced and resilient portfolio. Importantly, the FMEG segment remained profitable for the fourth consecutive quarter. given why it's strategically ramping up our A&P investments to strengthen brand presence and drive long-term growth. As we continue to scale, we expect profitability to expand further, reflecting the leverage in our business model. Looking ahead, we are confident in the long-term potential of the SMT segment and remain on track to achieve our Project Spring targets of 1.5x to 2x industry growth and EBITDA margins in the range of 8% to 10% by FY '30, positioning the business for sustained growth and value creation. Moving on to Slide 10, which provides an update on our EPC business. During quarter 3 FY '26, EPC revenues grew by 4% year-on-year, reaching INR 4,069 million, this quarter, we commenced execution of our existing orders under RF scheme, which is expected to generate INR 4.5 billion over the next 3 years for project execution and an additional INR 3.5 billion for 10 years for project O&M. Segment profitability stood at INR 272 million, translating to a margin of 6.7%. Looking ahead, the annual sustainable operating margin is expected to remain in the high single digits over mid- to long term. That was the update for the quarter. Thank you, and we are now open for questions.

[Operator Instructions] The first question is from the line of Sonali Salgaonkar from Jefferies.

Congrats on a strong revenue growth. I have 3 questions. First, a strong revenue growth in the C&W segment, would it be able to quantify what is a volume growth for this quarter year-on-year? .

Yes. Thank you for your question. And you wanted to understand the volume growth, right?

Yes, in C&W, Cables and Wires segment.

Both cable and wires, our volume growth are about 40%.

Great. And I think in the presentation, you said revenue...

[indiscernible].

Could you say that again, sir?

I'm saying our domestic Cable and Wire business grew at 40% volume this quarter.

Right. And any more detail you would like to share as to which only the industries contributed higher because 40% is very significantly having?

There is sustained momentum in both government and private CapEx that we have seen. And in case of real estate, has picked up fairly well. Are internally also, we have -- due to the commodity price rise, it is very obvious that channel partners usually tend to stock, especially in terms of wire -- that has also led and contributed to the higher surge in top line.

Sir, my second question is on the EBITDA margin. We understand the reasons that you have outlined in your presentation as while the drop was both in the EBITDA margin. So we see to follow-up questions. Firstly, such high volume growth would intensively result in good operating measure, right? So that is one. Secondly, I think you did take a price hike of about 6% year-on-year. So could you help us understand what exactly led to this sales EBITDA margin both year-on-year and Q-o-Q?

So I'll try and answer that. There are multiple factors here, okay? The major reason here is the rise in commodity prices. Now if you look at year-on-year increase, the copper has risen almost 50% and aluminum almost 25%. And in this quarter itself, the 22% inflation has happened in copper price compared to previous quarter. Now all of it to be passed on, we -- it's a strategic call for management to pass it on in a staggered manner. So we've been revising our prices, but not all of it has been pass off. So it takes time to pass on the rise in input cost prices. That is the first thing.

So Sonali, as Shashank mentioned, when the copper prices drive so high and so secondly, you have to take a conscious call of how you want to pass on. Because if you look at this specific financial year, from April till December, the copper prices have risen by 35%, and this is including the rupee depreciation. And similarly, if you look at aluminum, aluminum has risen by 27% Out of the 35% of copper rise, 21% which happened within this quarter itself, and 11% of that has happened in December itself, right? So we will consistently pass on that cost of acting inflation to the end customers month but we have taken a conscious call that such high 35% passing of inflation can't be done every month and hence, in a bit of a staggered manner. So we've been doing it. We've taken a bit of a high growth at the end of the quarter, we have again taken a bit of a time hike towards the beginning of this quarter as well. But still, we haven't passed on the complete price hike or the commodity pricing inflation. Hence, if you look at the financial statement, we realize that most of the decline in the EBITDA margins have been on the gross margin. You are correct in mentioning that such high top line growth will result into operating leverage, which is very much visible if you look at everything below the gross margin. So we have realized a lot of improvement as far as our operating leverage and everything is concerned. But yes, this is a conscious call what we have taken. What we also need to appreciate that what we were able to achieve through this staggered passing on. See, if you look at our performance in this year, our Cables and Wires segment has grown 35% year-on-year. And that too on a base where we are operating at 2x of the industry or the second largest player. Also, this has resulted -- the staggered passing on of copper prices to our end customers have also resulted in this improvement of loyalty of those customers with us because we don't have to take up front of reduced demand, neither of lower margin. We'll definitely be passing on whatever commodity inflation will be coming off gradually, but this is something that we have taken a strategic call you've been following this sector for many years, you will recall that even in FY '22, similar commodity price inflations were there. Copper has gone up by 40%, whereas aluminum has gone up by almost 25%, 27%. Even at that point of time, poly margins had taken a hit for a quarter or 2, but then we had gradually recovered back those margins. So we believe that pretty similar is something that will play out. There can be margin impact for a quarter or 2. But if you look at more of a longer-term view, we should be able to recover some of our margins back.

May I just ask what is the quantum of price hikes that we have taken at the start of this quarter you mentioned [indiscernible].

Can you repeat the question?

Price hikes that you have taken at the start of this quarter.

The total price hikes that we would have taken within this quarter will be almost 75% to 80% of whatever commodity inflation was there.

Understand. Got it. And just one last question on the exports. While there has not been a degrowth, but what -- how do you foresee the exports to shape up the coming quarters?

So Sonali, on export, in fact, majority of the revenue that we've accrued this quarter has come from other geographies other than U.S. So -- and in fact, when U.S. comes in, it will further add to the revenues. In fact, we've done better in Middle East, Latin America. So all of the geographies are contributing significantly. And there is a healthy order book. So I think which we will see in the further quarters, it will translate into revenues for the segment.

Any reason why the U.S. is weak this quarter? Is it tariff related? .

Of course, it is tariff related. And I think this is a global overhang, which I believe is impacting everybody, not just in India, but worldwide. So we are awaiting final resolution of this matter. .

The next question is from the line of Akshay Gattani from UBS. .

Congrats on the strong set of numbers. So you highlighted 40% growth -- volume growth, domestic volume growth. In your sense, what would have been industry growth and where is your market share trending now? Any qualitative color will also be helpful. .

Okay. It's very difficult to give market share perspective today when we are the first one in the industry to come up with the results. So I think others are still come out. So then you will get a better estimate. And in terms of -- I think volume growth -- we've also seen very strong volume growth and value growth, but we are ready to comment on the market. We cannot comment on the basket until the others come up with results. .

Got it. And second question, sir, like you highlighted strategically, you have taken -- you have not passed through all commodity inflation to protect the demand. Do you think if the way copper and aluminum are moving up, if this continue, there could be some demand curtailment, some demand postponement -- temporary demand postponement?

It's very difficult to comment on the commodity price. I think we are also reviewing reading various support and everybody has their own view. But on the demand side, we are very confident that the growth momentum is going to continue. We've seen a good amount of movement in government private CapEx real estate, all segments are pumping in money into power utilities and infrastructure I think from that perspective, I don't think demand is going to be a challenge for us. .

The next question is from the line of Puneet Gulati from HSBC.

Can you also give some sense of breakup between what are the difference in the performance within Wires and Cables separately?

Probably our mix of cable and wires is in the ratio of 70-30, okay? But in this specific quarter, we've seen wire growth outpacing the cables growth, okay? So you can add a few percentage points there. And of course, in the value case, you will see that since copper commodity price has increased significantly, wire contribution has been higher.

Understood. And in terms of price hike, can you also divided between how much price hike you took in the previous quarter? What did you do in the current quarter is starting January? And how much do you still need to take to make up for the price inflation -- commodity inflation?

So Praveen, as I mentioned to Sonali, we've taken almost 75% to 80% of the commodity inflation, which was there during the quarter already within the quarter. The remaining will happen during this quarter.

The January 1, which you said that you've already taken or yet to take?

We've taken part [indiscernible], and we will further pass on further increase in prices gradually.

That's helpful. And secondly, if you can also give some color on what you see on your distributor side. How much of this demand would be just restocking and how much would be in consumer driven? .

See, Praveen, see, largely, as Shashank had mentioned, we largely see restocking happening mostly on wires rather than cables. Generally, when our distributors stock inventory, we maintain roughly 30 days worth of inventory. At the end of the previous quarter or beginning of this quarter, the channel inventory was in the range of around 40 to 45 days. So around 10, 15 days of additional inventory was there. But of course, the demand is pretty strong. Even till date in this quarter, we have seen very good sales happening, and there is definitely very good secondary and tertiary sales which are also happening. So the demand since it's very strong. We definitely see realization of all the deals that we have -- if you recall in the last 3 to 4 quarters, every quarter, we've seen similar happening because commodity prices have been continuously going up. Even then every successive quarter, we see improvement in terms of growth rate. So that means the fundamental demand itself is so strong. So I don't think there's any reason to worry. anyways we are coming into Q4 where executions are at its peak and everybody would want to achieve the yearly targets, be it government, be it private side. So Q4 should be another good quarter for us, and we are quite optimistic on that.

Excellent. Just lastly, if you can also give some sense of how does your capacity utilization stack up currently?

So our capacity utilization in the quarter stood at some around early 80s, okay? And -- yes, I think that's a fair estimate to take.

The next question is from the line of Praveen Sahay from PL Capital.

My first question is related to the institutional sales as you had highlighted they stand the user sales has outperformed the B2C. So can you quantify in that in terms of percentage?

Praveen, generally, our mix of distribution versus institution is around 90 to 10. But this time around institutional sales had grown faster than distribution sales, it would have improved by about a couple of hundred meters.

Okay. And also, as you highlighted about this institution, there is the CapEx led private or government and the real estate, both has done well. So also, if you can give some more color on that how is the real estate contribution for the wire, which has also outperformed.

I think if I got your question correctly, you're asking about the real estate market. So see, we've studied some data where at least in top 8 cities, the amount of launches in terms of number of units and the amount of sales that has happened has been pretty robust in 2024 and the same momentum is continuing in 2025. We expect the same growth momentum to continue in the coming quarters as well. So while demand is not a problem.

To add to Shashank's point, we have been talking since a couple of quarters now that while we have seen majority of the positive demand on the premium side, recent data also suggests that there is a pickup happening even on the affordable side. So that is something where we have been targeting to improve our market share since last 2 to 3 years. You are aware that we had introduced Aida brand, which was to compete with the unorganized players in Tier 3 to 5 cities. And we have seen very good growth happening in Tier 3 to 5 cities through our launches. Over and above that as well, even in Tier 1, Tier 2 cities, our focus has been more on Class 2 wires, wherein we are definitely seeing a lot of market share gains for us. So both of them are working, even the industry growth is picking up pace, and we are also seeing a lot of market share gains for us because of initiatives that we are taking with these projects.

So just lastly, if you can give on the revenue...

Sorry to interrupt you Mr. Praveen, can you please use the handset mode and speak as they're not able to hear you?

Yes, yes. So can you give us some color on the volume growth for the Wire and Cable out of 40% of volume growth in overall, how much is wire, how is cable?

So Praveen, let me give a very clear distinction between top line growth as well as volume growth. For us in the domestic circuit, the volume growth has been around 40%. Both cables and wires have grown at pretty much similar pace in terms of volume. In case of revenue, as Shashank had mentioned, tires are copper-based and copper has been more inflation. For us, wires growth was at about -- at a revenue level at 70%, whereas for cables, the growth was around 50%.

The next question is from the line of Ravi Swaminathan from Avendus Spark.

Congrats on a good set of numbers. I have only one question. This is regarding the cable segment. If you can call out the top 3 or 4, 5 sectors which are driving the sales growth. I think power T&D would be one of the sizable sectors, which would be driving the growth. What would be the approximate contribution of that? And yes, so all these segments, how they are growing, which is growing faster, which is growing relatively slower, if you can give a broad context.

See, major consumption, if you go to product category level in cables, happens in power cables, control cables, which largely going to power infrastructure, okay, energy, utility infrastructure. That's the primary demand sector. And followed by that, there is strong growth that we are seeing in industry segment also. And if you look other -- if you look at all verticals, besides the Sunrise, but if you look at key verticals, manufacturing, utility, government, all of them have picked up a good amount of demand.

And the contribution of Power T&D in the overall capable demand, how much will it be? Any sense on that?

Sorry, come again?

The contribution of power T&D in the overall demand for cables, how much will it be?