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Informist, Thursday, Jan. 23, 2025

By Aman Aryan and Anjana Theresa Antony

MUMBAI – A major chunk of Polycab India Ltd.'s five-year capital expenditure guidance will be allocated to the core wire and cable business, given the segment's robust growth potential in India and abroad, the management said in a post-earnings call with analysts Thursday. The company had said Wednesday it is aiming for capital expenditure of INR 60 billion-INR 80 billion in the next five years. The domestic wire and cable industry is expected to grow 1.5-2.0 times the real GDP, with opportunities for market share gains for organised players, the management said on the call.

The wire and cable segment, which generates over 80% of Polycab India's total revenue, is expected to witness a multi-year upcycle and an increase in volume growth in the medium term owing to incremental demand from the real estate sector, the management said. The company expects the Indian real estate sector to grow to $1 trillion by 2030, from $200 billion in 2021. Apart from this, the PM Surya Ghar – Muft Bijli Yojana scheme for solar-powered homes will also act as a good demand driver, the company's officials said.

The global wire and cable market, on the other hand, is witnessing strong growth and is expected to reach $410 billion by the financial year 2029-30 (Apr-Mar), the company's management said. The company had earlier said it plans to increase the contribution of exports to its total revenue to more than 10% in five years. The growth rate for exports is expected to be higher than for the domestic business, the management said.

Looking at the export demand, Polycab India plans to set up an export-orientated plant, the management said, adding that the company is more focused on margins as far as exports go. A big needle-mover for Polycab India could be the proposed US import duty of 25% on Mexican products. Currently, Mexican cables enjoy zero import duty in the US, while Indian cables are charged 3-5% duty. "We will have to see whether similar import duties are levied on India or not," the management said.

The company said it has received almost all approvals for products it exports to the US, an important export destination for Polycab India, with almost a third of its exports in the December quarter directed to this country.

Although the wire and cable segment as a whole reported 12% on-year growth in revenue for the December quarter, the company's wire business was affected by a downward trend in copper prices along with high channel inventory of wires at the beginning of the quarter. Addressing sector analysts in a conference call, the management said the channel inventory for wires is now back to normal and the business will see better demand in the March quarter. 

Margins in the wire and cable segment normalised in the December quarter after being low in the previous three months. While the company's cable business saw healthy demand in Oct-Dec despite slow government spending, a sustained slowdown in capital expenditure will affect the business in the long run, the management said. 

On the other hand, its fast-moving electrical goods segment is expected to grow faster than the industry. Polycab India had earlier guided 1.5-2.0 times market growth for the segment, despite seeing price erosion in the segment. While it does not have any plan to launch new products in this vertical, it plans to launch a new product in the wire portfolio in the near future. The company's capacity expansion project is planned for all product categories and the expanded capacities are fungible in nature, so they can be used for manufacturing any type of cable.

Also, it is setting up a plant to manufacture extra-high-voltage cables with an expected capital outlay of INR 6 billion-INR 7 billion, the management said. The plant is expected to be commissioned by the end of FY26 and contribute to the company's top line from FY27 onwards, the official said. The company also expects good growth in its engineering, procurement, and construction business going forward.

Currently, Polycab India has a strong presence in the western part of India and plans to increase its presence in other regions as well, the management said. The company continues to focus on expanding to new geographies as part of its growth strategy.

On Thursday, shares of the company closed 1.4% higher at INR 6,250.90 on the National Stock Exchange.  End

US$1 = INR 86.45

Edited by Rajeev Pai

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