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Ladies and gentlemen, good day, and welcome to the Polycab India Limited Q4 FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Gandharv Tongia, Executive Director and Chief Financial Officer, Polycab India Limited. Thank you, and over to you, sir.
Thank you, operator. Good afternoon, everyone. Thank you for joining us. I hope all of you are staying healthy and safe. I'm Gandharv Tongia, Executive Director and CFO at Polycab India Limited. On this call, we shall discuss the Q4 FY '25 results, which were approved in the Board meeting held yesterday. We will be referring to the earnings presentation, financial results and financial statements, which are available on the stock exchanges as well as on the Investor Relations page of our website. Joining me today from the management team, we have our Chairman and Managing Director, Mr. Inder T. Jaisinghani; and our Head, Investor Relations, Mr. Chirayu Upadhyaya. Let me now hand over the call to Shree Inder bhai for his comments.
Good afternoon, everyone. We are proud to announce that FY '25 has been a landmark year with record-breaking revenue in both the fourth quarter and full year, powered by strong growth across all segments. Our full year revenue crossed INR 220 billion, making Polycab the largest company in the electrical industry by revenue. Our Wires and Cable business extended its leadership FMEG, outperformed industry as well as achieved a profitable breakthrough. And EPC delivered an exceptional scale. This helped us register robust revenue and profitability growth with PAT crossing INR 20 billion mark.
We fully reaffirming our position as the most profitable company in the electrical industries for third consecutive year with powerful industry tailwind, a strong demand outlook and our transformation agenda under Project Spring. We are energizing and ready to unlock the next phase of sustainable industry leader growth. With this, I would request Gandharv to give you a flavor of the macro environment.
Thank you, Inder bhai. Since February this year, we have witnessed a sharp escalation in global trade tensions. What began as targeted U.S. tariffs has quickly rotted into sweeping measures prompting swift retaliation from key trading partners. By early April, tariffs were nearly across the board. This rise in trade barriers and the resulting policy uncertainty are already taking a toll. The IMF has revised global growth projections downward, 2.8% for 2025 and 3% for 2026 from the earlier estimate of 3.3% for both the years. Advanced economies will be at the brunt with the U.S. now expected to grow at just 1.8% and the EU area at a mere 0.8%.
Even emerging markets, long engines of global growth are not immune. China, in particular, faces significant downgrades. Despite these global challenges, India's growth story remains fundamentally strong. Our structural drivers and expanding workforce, rapid digitization and a resilient domestic economy are laying the foundation for sustained growth. Unlike many others, we are relatively insulated from global tariff actions, and we have acted decisively. The Reserve Bank has already cut interest rate by 50 basis points with further easing likely.
Momentum on the ground is real. Digital payments are surging, industrial production is picking up and auto sales are recovering. In March, industrial output grew 3% year-on-year and infrastructure goods surged nearly 9%, the highest in 17 months. PMIs for both manufacturing and services remain firmly in expansion, reflecting robust business activity. Inflation is softening. CPI in March hit a 67-month low at 3.34% and core inflation remains content aside from gold and silver linked categories.
Real estate is booming, reaching a decadal high last year. Corporate investment is rebounding, fueled by stronger balance sheets, lower borrowing cost and higher capacity utilization. Government capital expenditure and resilient service exports are also adding momentum. So while the world faces uncertainty, India stands out. We are not without challenges, but our fundamentals are strong, our policies are proactive and our resilience is proven. Let us stay focused on the long-term opportunity and not just short-term noise. I would now hand over to Chirayu to take you through the financial performance for the quarter and the year.
Thank you, Gandharv. Let me now draw your attention to Slide 4 of the earnings presentation. For the quarter ended 31st March 2025, we are pleased to report that the consolidated revenue grew by a strong 25% year-on-year, supported by robust performance across all business segments. Our EBITDA grew by 35% year-on-year, outpacing revenue growth, resulting in a 110 basis points improvement in EBITDA margin, which stood at 14.7% for the quarter. This margin expansion was driven primarily by a profitable turnaround in our FMEG business, which has been the result of sustained strategic investments and improved margins in the EPC business, supported by a low base and better execution discipline.
On a sequential basis, EBITDA margins expanded by approximately 90 basis points, largely on account of margin improvement in both Wires and Cables and FMEG business. In Wires and Cables improved operating leverage contributed meaningfully, while FMEG benefited from a richer product mix and better absorption of fixed costs. At the PAT level, the company delivered its highest ever quarterly PAT of INR 7.3 billion, registering a strong 33% year-on-year growth. Our PAT margins improved by approximately 60 basis points year-on-year, reaching 10.5% Finance costs for the quarter stood at INR 325 million, while other income came in at INR 481 million.
For a detailed breakdown of these line items, I would encourage you to refer to Slide 27 of the presentation. We continue to maintain a healthy balance sheet with a net cash position of INR 24.6 billion. Our working capital cycle improved to 49 days in quarter 4 of FY '25, primarily due to a temporary reduction in inventory days, as some of the raw material purchases are currently in transit. On a normalized basis, we expect the working capital cycle to return to our long-term steady range of 50 to 55 days. The CapEx for the quarter stood at INR 1.3 billion, taking our total capital expenditure for FY '25 to INR 9.6 billion, which is well aligned with our guidance.
Turning to our full year performance for FY '25. I'm proud to share that Polycab has delivered its highest ever revenue, EBITDA and PAT in the company's history. Revenue crossed the INR 220 billion milestone, growing 24% year-on-year. EBITDA grew by 19% with a full year margin of 13.2%. PAT grew by 13% year-on-year, surpassing the INR 20 billion mark. This performance not only reflects our financial strength but also solidifies Polycab's position as the most profitable company in the electrical industry for the third consecutive year. Moreover, with this performance, we have now become the largest company in the Indian electrical industry by revenue, a significant milestone for all of us.
Moving on to Slide #5. We are pleased to report continued market share gains despite operating off an already high base. Our domestic Wires and Cables organized market share has grown to 26% to 27%, up meaningfully from 18% to 19% in FY '19 and a step ahead from 25% to 26% in FY '24. This speaks volume about our consistent execution and ability to lead the industry with innovation and scale. FY '25 also marked a key inflection in terms of capital investment. For the first time in our history, annual CapEx reached almost INR 10 billion, underscoring our long-term commitment to growth.
We remain on track with our Project Spring CapEx road map of INR 60 billion to INR 80 billion over the next 5 years, which will power our capabilities, scale and innovation. We have further strengthened our balance sheet with net cash increasing to INR 24.6 billion, reflecting continued focus on efficient cash flow management. In line with our capital allocation priorities, we have proposed a dividend of INR 35 per share, resulting in a dividend payout ratio of 26.3%. This is a step forward towards our Project Spring target of 30% payout by FY '30. Now let's move to Slide 9 for a quick update on the Wires and Cables business.
The Wires and Cables segment delivered 22% year-on-year growth during the quarter. Within this, the domestic business recorded an impressive 27% year-on-year growth, fueled by continued momentum in infrastructure, housing and industrial investments as also reflected in the macro commentary. Notably, domestically, cables outpaced wires in terms of year-on-year growth this quarter, while the opposite was true for a sequential basis. Both distribution and institutional channels showed healthy growth. Regionally, the West led the performance, followed by the South, North and East, underscoring our pan-India presence and reach.
As highlighted on Slide 11, our products continue to contribute meaningfully to nation-building efforts across sectors such as renewable energy, metro rail, data centers and manufacturing. Our international business witnessed a temporary dip during the quarter due to the rollover of a large order into the next quarter. That said, we remain optimistic about the outlook. With a healthy order book and favorable demand trends, we anticipate strong growth going forward. I would also like to highlight that we have now expanded our global footprint to 84 countries, up from over 50 in the FY '21, reflecting our growing global ambition. EBIT margins for the Wires and Cables business came in at 15.1%, improving by 140 basis points sequentially.
This performance was supported by better operating leverage and a favorable product mix, though partly offset by lower contribution from the international operations. Moving on to Slide 13 for an update on the FMEG business. The FMEG business delivered exceptional performance this quarter, registering a strong 33% year-on-year growth with robust contribution from across all product categories. This marks the fifth consecutive quarter of outperformance versus industry benchmarks, reaffirming the strength of our strategy and execution in this high potential segment. Let me take a moment to walk you through the key drivers of this performance. Starting with fans, despite a delayed onset of summer, the segment recorded impressive growth. This reflects the success of our premiumization strategy and focused execution.
We launched over 100 new SKUs in this category, extended our geographic reach to over 350 new towns and added 280 channel partners and more than 8,000 retailers during the year. As a result, premium fans now contribute around 18% of FY '25 sales volume and almost 30% by sales value. In the Lights and Luminaires business, we sustained our growth momentum of last quarter, even amidst continued pricing deflation. Growth was driven by both volume and value, thanks to our expanding premium portfolio, which now contributes to almost 21% of the lights and luminaires sales volume and again, almost 30% by sales value.
We launched over 200 new SKUs, expanded our footprint to approximately 700 towns and onboarded 170-plus partners over 11,500 retailers this year alone. Our value proposition of high-quality, energy-efficient lighting solutions continues to resonate well across urban and semi-urban markets. Our Solar products business stood out as a clear outperformer, growing nearly 2.5x over the year, making it the third largest category within our FMEG portfolio. With strong tailwinds from the government initiatives like the PM Surya Ghar Yojana, state-level subsidy schemes and rising awareness around renewable energy, we see a long runway for growth in this category.
States such as Maharashtra, Gujarat, Rajasthan, Telangana, MP, UP and Tamil Nadu led demand, and we expect the momentum to continue. Other product categories, including switchgears, conduit pipes and fittings and switches also delivered healthy growth. This was supported by continued momentum in the real estate and construction sector and our focused approach towards portfolio enhancement and market penetration. As mentioned in the opening remarks, we are pleased to report that the FMEG business turned profitable in quarter 4 of FY '25, following 10 quarters of sustained strategic investments in talent acquisition, product development and brand building.
These investments are now translating into tangible results, and we remain committed to this path. Looking ahead, the FMEG segment is expected to continue its upward trajectory, aligned with our Project Spring goals of achieving 1.5x to 2x industry growth and improving EBITDA margins to 8% to 10% by FY '30. Our ongoing investments in channel expansion, product innovation and brand equity will be pivotal in unlocking long-term value in this segment. Moving on to Slide #15. This slide provides an update on our EPC business. We achieved revenues of INR 6,028 million in quarter 4, marking a 47% year-on-year growth. Profitability increased by 171% year-on-year with segmental margin at 9.4%.
The robust growth within the business was driven by strong execution of the RDSS order book. During the quarter, the company executed an agreement with BSNL for design, supply, construction, installation, upgradation, operation and maintenance of middle mile network of BharatNet in the Bihar Telecom Circle, amounting to INR 30 billion inclusive of GST. This includes a CapEx of INR 15 billion, OpEx for newly constructed network of INR 9.3 billion and OpEx for existing network of INR 5.2 billion. The execution period for the CapEx part is 3 years with OpEx part on the new network beginning from fourth year post completion of the CapEx lag. The OpEx part on the existing network has begun along with the execution of the agreement and will last for 10 years.
Polycab has also been declared the lowest bidder in the Goa, Karnataka and Puducherry package with the CapEx order amounting to INR 41 billion, inclusive of GST. Execution of the agreement for which is expected to complete soon. Our open order book in the EPC business stands at around INR 70 billion as at end of March 31, 2025. The annual sustainable operating margin in this business is expected to be in high single digit over medium to long term. Before we close the quarter's update, I want to take a few minutes to speak about a subject that is not just a business imperative, but a moral one, our commitment to environmental, social and governance excellence.
At Polycab, we believe that the company's true value is not only measured in revenue or market share, but also in how responsibly it operates towards people, the planet and the principles of good governance. ESG is no longer optional. It is essential for long-term resilience, for trust and for value creation. It is about doing well by doing good. Over the past 3 years, we have laid a strong foundation for this journey. We developed a comprehensive ESG framework, one that is not just theoretical, but integrated into how we operate. We established an ESG charter that [indiscernible] accountability through a dedicated board ESG committee, a central ESG council and a cross-functional ESG working group. We also appointed our Chief Sustainability Officer and worked closely with expert consultants to align our strategy with global standards.
Importantly, we spent the last 2 years working quietly but steadily on internal ESG goals, understanding our impact, strengthening our capabilities and building the right culture. Earlier this year, we took another critical step forward. We refreshed our materiality assessment by actively engaging with a wide range of stakeholders, employees, customers, investors, suppliers and community representatives. This collaborative approach helped us identify 15 ESG topics that truly matter to both our business and our stakeholders. I'm pleased to share that going forward, we are setting bold, measurable 5-year goals on 10 of these material topics covering all 3 pillars of E, S and G.
These goals are laid on Slide #19. Our ESG goals form the core of our 5-year ESG road map aligned with our broader transformation initiative, Project Spring. Through it, we are embedding sustainability into every aspect of our business, ensuring we grow responsibly, operate efficiently and lead by example. We know this is a long road, but with the right intent, a strong foundation and a culture of responsibility, we are confident that Polycab will not just keep pace with global expectations, but help shape them. Thank you for your continued support and belief in our journey. 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.
Congratulations on a great set of numbers. Sir, my first question is on the domestic cable and wire segment. So it seems to have grown at a very strong rate of 27% year-on-year. Could you quantify how much of that is volume growth and how much of that is value? And within that also, possibly split between cables and wires?
Thanks a lot, Sonali. As far as domestic performance is concerned, it has been again one of the best quarters that we have seen. This is something which generally plays out that quarter 4, we see a good pickup in demand, and this is something that actually played out.
As far as the mix of value versus volume is concerned, the volume growth within the domestic cables and wires for the quarter year-on-year was around mid-teens and the remaining obviously came from the value part. Between that, the cables grew faster than wires. So cables was a bit higher -- in the higher teens range and volume growth for wires was in high single digits.
Ladies and gentlemen, we seem to have lost the connection of the participant. The next question is from the line of Achal Lohade from Nuvama Institutional Equities.
Congratulations for great set of earnings. Just to extend on the previous question, if you could also give in a similar fashion for FY '25? And if you could remind us for FY '24, I'm just trying to see what has been the volume growth trend for last couple of years overall in the domestic market and also within cables and wires?
Sure, Achal. So if you look at the entire year's performance, again, the volume growth for the cables and wires business has been in around mid-teens. Cables has obviously grown a bit higher and volume growth for wires is again in single digits -- high single digits. This is, again, in line with our guidance that we expect this market to grow between 1.5 to 2x of real GDP growth and us to outperform over that. We have been able to do that consistently. And this year, again, we have been able to gain market share. We believe our market share now in the domestic organized market is closer to around 26% to 27%.
And would you have Chirayu for FY '24 also the volume growth for cable, wires and overall in the domestic business?
Achal, I don't have it handy, but we have disclosed it in our last year's call, so probably we can refer to that.
Okay. Okay. The second question I have is with respect to the margins. For the fourth quarter, we've had strong margin performance. This is despite the relatively weaker performance in the export, which is the most profitable segment. So I'm just curious to understand in terms of the margins, have there any inventory gains, any one-offs here given fourth quarter is the balancing quarter? Just wanted to understand your perspective on the same.
So Achal, there are no one-offs as far as margin improvement is concerned. The entire improvement is largely because of the operating leverage that we have gotten the advantage of. If you look at our margin trajectory of last 3 to 4 years on a quarter-on-quarter basis, you'll always see that there is a consistent improvement consequentially in every quarter, and fourth quarter is always the best in terms of margin. This year has been no different, and we have been able to improve on our margins in the fourth quarter here as well.
Understood. And just the last question in terms of the EBIT margin guidance for cable and wire? How do we look at that for the next 3, 4 years?
Achal, our guidance as a part of Project Spring is on EBITDA. And we've given a guidance that over the near to midterm, we expect the EBITDA margins in the Cables and Wires business to be consistently in the 11% to 13% range.
This is only for cables and wires piece, right?
Yes.
And what was it for FY '25? That's my last question.
So EBIT margins for cables and wires for the year were at 13.6%. So EBITDA margins would have been between 14% to 15%.
The next question is from the line of Renu from IIFL Capital.
Congratulations for the strong performance. My first question is just to understand the 100 bps margin expansion that we have suggested in the cables and wires, is it regionally driven or broad-based? And the key drivers here would be GTM and portfolio expansion or anything else? That's the first question.
Sure, Renu. So the margin expansion that we have seen in cables and wires is on a sequential basis from Q3 to Q4. That expansion is a bit because of the operating leverage as well as because of the change in product mix. So as I referred to in my initial comments, while on a year-on-year basis, cables has outperformed wires. But if you look at the sequential performance Q4 over Q3, wires has grown faster than cables.
And obviously, since wires is a better margin business, it has also contributed in the sequential improvement of margin. Yes, our international business, not relatively doing well, has taken a bit of sheen off of that improvement that we saw, but the larger reason is because of these 2 reasons.
Got it. And the market share also resultant of GTM and regional approach or anything else?
So that is a continuous work in progress. It will -- obviously would have contributed in the improvement. But as I was mentioning, the larger part of the improvement would have been because of the operating leverage and change in product mix. Incrementally, if you look at our longer-term period, maybe over a period of 1 year, 2 years, 3 years, the other initiatives will definitely contribute much more meaningfully as far as margin improvement is concerned.
Got it. the second question here is on the solar portfolio, which is now the third largest category within the FMEG. So what is Polycab's value proposition here and our GTM strategy? Is it entirely through system integrators, EPC contractors or we have direct revenues here from the end markets? And also, what are the plans for backward investment in manufacturing for this category?
So Renu, largely, we sell solar inverters in that portfolio. Over here, we don't manufacture it in-house, as we outsource the manufacturing and then sell it to the end customers. As of now, there are no plans of setting up an in-house manufacturing. So we'll continue with this model. We'll obviously onboard more vendors through which we can increase our sourcing and then service the full range up till 325 kilowatts, which is what is the upper limit as far as the usage in India is concerned.
And any plans to get into solar EPC rooftop project?
Not as of now.
The next question is from the line of Deepak Gupta from JM Financial Asset Management.
My first question is on the export opportunity. If you could give us some perspective about how do you see export revenue shaping up for FY '26 given the challenges that we are seeing in U.S. regarding trade tariffs, et cetera?
Sure, Deepak. So as far as our performance on exports is concerned, we expect a material improvement going ahead every year. Within Project Spring, we have anyways laid out a guidance that we would want to increase the contribution of exports to the overall revenue to 10% from the current 6% that we saw in FY '25. The lower performance or relatively lower performance in FY '25 was because of various reasons. As you are aware, in the first half, we were still going through our business model change in the U.S., which obviously led to a bit of a lower sales from the largest geography that we had over there. But that is now complete and behind us, and we have our sales happening in the U.S. to the hybrid model.
The other large geographies are something that we have tapped into. We have a very good order book coming in from Middle East, from Europe, from Australia, and that is something that we will service over the course of next year and so. Lastly, 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 the geographies, which export to, and that means it's status quo as compared to what it was a couple of months back. Even going ahead, post the completion of the 19-month period, if you look at the tariffs, which are expected to get levied, India tends to benefit by -- because the tariffs are relatively lower than the other larger cable exporters from Asia.
So we don't expect any negative impact of tariffs. In fact, if you look at the current status, all our current orders, which we had from that geography, we were able to pass on the increase in cost because of the tariffs to them. So in general, if you take a mid- to long-term view, we are very positive on the exports opportunity. We keep on adding new geographies. As I mentioned, last year to this year, we already added 5 new geographies wherein we are now approved as an exporter, and we will keep on improving that. In fact, what we are also doing is we are now setting up 3 different divisions within our exports, wherein we will be catering to the OEMs, to the distributors and through EPCs through the separate teams.
So we are doubling down on execution. We are increasing the team. And we've also charted out the geographies where we want to expand to. In the geographies, we have a list of the EPC contractors as well as the end clients where we would want to increase our sales to and increase our throughput from the existing clients as well. So we are very confident that we should see very good growth in exports going ahead, and we should be able to achieve the FY '30 target that we have taken within Project Spring.
So therefore, would it be right to assume that your EBITDA margin for full year, which is the 13.2% can only improve from here going onwards, given the fact that exposure will be increasing in your overall proportion of sales?
So Deepak, there are multiple variables at play. 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, which, for example, let's say, we are also going to be investing a lot in capacity expansion over the course of next 5 years. While in the initial phases, the utilizations are low, the operating leverage is something that goes away, and that is where there can be a bit of a negative impact of -- on the margins front.
The other impact can be because at a company level, we will have to be investing a lot in advertising and promotion for our B2C business. A percentage of that gets allocated to the Cables and Wires segment as per the top line contribution, and that can also have a bit of a negative impact. We are also going to be investing a lot going ahead on R&D and innovation, and that obviously expenses can eat up a bit into your margins. So largely, there are positive variables as well as negative variables. And that is where the margin trajectory going ahead, in spite of whatever will happen. I think we have given a guidance of 11% to 13%, and we are reasonably confident that we should be able to deliver within those margin rates.
The next question is from the line of Sonali Salgaonkar from Jefferies India.
And sorry, I dropped off my line got disconnected earlier. Sir, my second question is, any pricing actions you have taken in the wake of copper movement by TD? And also thirdly, on the FMEG. FMEG margins, I know this question had come up earlier, but what is the kind of sort of guidance that you would like to give on a sustained basis for FMEG margins going forward?
Sure, Sonali. So as far as the Cables and Wires business is concerned, as you are aware, we pass on the changes in commodity prices on a monthly basis. That is the practice that we followed in the previous quarter and the current month of the quarter as well. Whatever increase or decrease in copper, aluminum or other commodity prices were there, we passed that on. Largely, I think in the previous quarter, on the copper front as well as aluminum front, mid- to high single-digit pass on of the increase in commodity prices was done.
And again, basis whatever changes have happened in this quarter, all those changes have been passed on to the end customers. As far as the FMEG margins are concerned, it is after almost 10 quarters or 10 quarters that we have seen a profitable quarter for the FMEG business. This is a result of all the initiatives that we've been taking, wherein we have been able to improve the utilization of our manufacturing plants and hence, receive a benefit of operating leverage. We've also changed -- seen a change in the product mix that we have in the favor of higher-margin products like switchgears or solar or conduit pipes wherein we are profitable. So that has led to this improvement.
Going ahead, we expect that we should be able to continuously see improvement in our margins towards our guidance -- guided range of 8% to 10% of EBITDA margins by FY '30. So every year, we should see an improvement from the current margins that we have in the FMEG business.
Ladies and gentlemen, the next question is from the line of Akshay Gattani from UBS.
My question is on the export front, I wanted to understand the profile of what kind of cables are going in the export? Like are these more of a specialized cables or normal power cable? Trying to understand like end-user exposure in the exports market?
Sure, Akshay. So it's a mix of both, but the higher proportion will be from low voltage and medium voltage cables, which has the maximum demand from across geographies. But having said that, we also supply solar cables or cables which are used in other specialized end industries as well, and that will obviously depend on the geography as well as the project wherein we have bid on. But to answer your question very simply, the larger contribution is from your low voltage and medium voltage cables and the smaller part coming in from specialized cables.
Okay. Got it. And another question is on the domestic front. What is driving this strong demand per se, like end user industry? Like these are LV, MV cables or you're seeing HV cables also doing reasonably well?
So Akshay, since low voltage and medium voltage combined are almost 50% of the overall market, I think the kind of demand momentum witnessed over there will have the maximum impact as far as the industry growth is concerned as well as the growth of larger players like us is concerned. So that is obviously the primary type of cables, which is driving the demand growth. But even high voltage or EHV cables, the demand for those type of cables is also pretty strong.
As far as the industries are concerned, across all the types of industries, we have seen consistent good demand. Power industry is one such industry wherein we have seen an improvement in demand, and we expect this to be a consistent phenomenon going ahead. Especially the transition to renewable energy sources is something which is a very, very big opportunity in the country and for manufacturers like us, and we are trying to tap as much of that opportunity as possible.
Other industries like real estate, they continue to do well, and we expect it to do even better going ahead, looking at the kind of momentum we have seen over the past 2 to 3 years. We have the product categories, which can be supplied to every -- or each and every type of industry, which is there in India. And we keep on improving on the quality of those products, the availability of those products. And that is where we expect that we continue to see a very good growth. In line with our Project Spring guidance, we will target to grow the Cables and Wires business at almost 1.5x of the industry growth and continue to gain market share from the other industry peers.
This is helpful. One more question, if I can. As you said, like R&D expenditure might go higher and this could impact near-term margins. So where will this R&D expenditure be going? And any guidance as a percentage of sales, what could be the range?
We wouldn't want to give a guidance on the percentage. But on an absolute basis, definitely, it will continue to go up. And it is not something which is -- which will just be a near-term phenomenon. It is something that we will do consistently. If you recall, one of the pillars within our Project Spring guidance is that we will increase our focus on innovation and R&D. So that is something that is within our to-do list, and we'll continue to focus much more or much more aggressive than what we have done in the past and increase our spend over there.
The next question is from the line of Praveen from PL Capital.
My first question is related to the EPC. As you had given a INR 70 billion order book, is that only a BharatNet order book you have, nothing to RDSS? And also because now you had already given us in high single-digit margin in EPC. So is that the same kind of a margin we are going to expect from the BharatNet project as well? So that's the first question.
Sure, Praveen. So the INR 70 billion order book, which I mentioned, consists of 2 components. Of the INR 70 billion, INR 40 billion is order book from the RDSS projects and the remaining INR 30 billion is from the BharatNet scheme. The INR 40 billion of RDSS order book is something that we have to execute over the course of next 2 to 3 years. So that will give us almost consistent quarterly run rate of almost INR 5 billion from that.
And the BharatNet order book is from the Bihar order that we have won, wherein the execution period is for 3 years of the CapEx part, which is roughly INR 15 billion and the remaining is something which is an OpEx part and which will be accrued over a period of 10 years after the completion of the CapEx period.
Okay. Okay. That's very helpful. Second question is related to the advertisement. That has down this quarter. So if you can give what is the normalized number the way forward we can see? And why that's down significantly, 24% down in this quarter?
So a couple of reasons, Praveen, over there. One of them is that generally in Q4, you do advertisement before the summer season and largely it's for the fans portfolio. As you are aware, this time, the summer season is a bit delayed, and that is where our spends on A&P were also a bit delayed. We have started doing more on that front from April onwards, and that is probably where you'll see that cost getting reflected in quarter 1 of FY '26. The second thing is we are also utilizing different mediums this time around.
Last year, we did a brand refresh event, and we had tied up with ICC being an official partner for 3 of the World Cup events. That is something wherein we had increased our spends materially last year. This year, relatively, it's lower, but consistently, every year, you'll see an increase over there. We are also utilizing different mediums for doing the A&P spend. So for us, this year, digital medium is something that we have focused a lot on as well as your on-ground activities with your retailers, distributors, et cetera. This type of A&P is relatively lower costing and hence, you might have seen a bit of a dip as far as A&P spends are concerned. But again, going ahead, all the type of both above the line and below the line marketing activities are something that we will pursue. And each year, you'll see an increase in the A&P spend that we'll be doing for our B2C business.
Okay. Okay. So we can assume this is a one-off way forward, we'll see the improvement there. Last question is related to the international business. So international business down 23% and you had said that's a roll forward to the next quarter. Is this due to nothing to do with the U.S. tariff escalation or something is because of that as well?
So Praveen, on as far as the U.S. tariff-related things are concerned, see, the end clients, obviously, even for them, there is, as of now, no clarity as what situation will persist, let's say, a couple of months down the line. So whatever orders we have received, that will continue to be executed. Whatever projects are ongoing in the U.S., obviously, they wouldn't get delayed and they will continue to raise demand for whatever types of cables that they require.
So we don't see any material change because of the tariff-related announcements as far as the demand from that geography is concerned. But of course, post there is more clarity, let's say, 2 months down the line, I think the demand momentum will improve even further. And that is where I think the momentum from our sales to U.S. will see further improvement even for all the Indian players or exporters.
The next question is from the line of Natasha Jain from PhillipCapital.
Congratulations on strong set of numbers. Chirayu, my first question is on the export side. So firstly, can you tell me the contribution from U.S. in our total exports for FY '25 and '24?
Sure, Natasha. So as far as this year is concerned, the contribution of U.S. of our overall sales would be in high teens. Last year, it was very close to 40%.
This, you are seeing share of total exports, right?
Total exports, yes.
Okay. And now that you're transitioning and you said you've completed the transition process from B2B to B2C and given that we're sitting at a low base where -- when U.S. is concerned and that market is strongest for us, can we expect a very strong bounce back in the U.S. export?
So Natasha, as I just mentioned to Praveen, there is a bit of an uncertainty because of the tariff-related announcements. Probably and hopefully, it should get resolved very soon in the next couple of months. And then I think we believe there should be a much better improved momentum as far as sales to U.S. is concerned. So as of now, while obviously, the improvement will be there because of our business mix getting -- business model getting stabilized, but I think much better momentum can be witnessed only after the entire tariff-related changes are implemented.
Understood. My second question is, again, related to Wires and Cables. You mentioned that sequentially a margin improvement happened also on account of favorable product mix. So can you just throw some light as to what kind of product mix did we change in Wires and Cables that led to margin improvement?
So again, Natasha, I mentioned previously that if you look at sequential quarter, Q3 and Q4, wires have done relatively better compared to cables. And since wires are of better margins, that led to an improvement in the margins of Cables and Wires segment.
Got it. So it's just more selling of wires and not really value-added products within any wires or cables category, right?
So there would have been an improvement because of that as well, but it won't be something which will be material in nature or -- so the largest improvement will be because of wires versus cables mix.
Got it. And one last question. Your FMEG top line is definitely very strong. But like you mentioned, the season is kind of moderated and for the rains to dampen the cooling season for this year. Can you tell us how is the secondary movement in that channel for your products specifically?
Natasha, we keep on receiving the benefits of all the execution steps that we've been taking. Of course, the delayed summer is something that might have a bit of an impact as far as fan sales are concerned, but we have other 5 other product categories, which are also delivering very well. We have seen very good momentum on those product categories even in this quarter in the month that has gone by. And we don't expect there should be any material impact on their sales because of whatsoever reason.
So -- I mean, on the fans sales, we'll definitely have to see how the season pans out and the demand pans out. But otherwise, we don't expect the overall FMEG top line to be impacted as much on a yearly basis just because of whatever is happening right now in this month or quarter.
The next question is from the line of Aditya Bhartia from Investec.
To start with just a clarification, this 11% to 13% margin guidance that you have given is at the EBITDA level and not at the EBIT level. Is my understanding correct?
That's right, Aditya.
Given that we are having 14% to 15% kind of margin this year, why are we kind of building in such a sharp decline in margins going forward? Is it just that we are being very conservative and actual margins are likely to be much higher than this guidance?
So Aditya, if you see how we have performed historically, our performance has always been -- and thanks to various reasons for that, but we have been able to outperform our guidance. 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 our guidance, we always give that something that is achievable by us.
In the near term or in the longer term, wherever opportunity arises and if there is a possibility that we can improve upon those margins through various reasons, maybe improving in the product mix or the various types of business mix, obviously, we'll go for that. But longer-term guidance for us will always be the 11% to 13% of EBITDA margins, which we believe is a sustainable margin range for the Cables and Wires business.
Understood. Sure. My second question is, just wanted to understand how relevant is power generation and power transmission and distribution-related demand for us. And within power generation, if you could also split in case it's possible between thermal and renewables, what proportion of our revenues is likely to be coming from cables that are supplied to these segments?
So Aditya, it will be very difficult for us to quantify which industry is exactly contributing to what kind of demand for us since most of our sales are through distributors. But definitely, based on the kind of feedback that we are getting from various channel partners, we definitely know that this sector is something which is contributing very meaningfully as far as our sales are concerned. We are very actively present in power generation and distribution, wherein your low voltage and medium voltage cables are required. And hence, we are a big player over there.
Power transmission is something wherein as of now, our presence is very limited. But within a few quarters' time, we should be able to start participating in that opportunity as well. So with the power sector expected to do very well over the next 3 to 4 years, we believe we should be in a very good position to take advantage of that opportunity and continue to grow our cables business through that.
And just a related question to that, because a lot of orders that have gotten awarded, let's say, on power generation side, especially on the thermal side, will start seeing execution in the next few years. So is it that we've already started seeing the benefit of that or bulk of that benefit is yet to flow through to us?
I think, Aditya, this is going to be a consistent trend for the next many years. It is not something which is already behind us. We have seen an improvement as far as sales to the power generation side is concerned, but this is something that will continue at least for the next few years. As we are aware on the -- at least on the power -- green power side, we have taken a very aggressive target of reaching 500 gigawatts of power generation through renewable sources, and we are roughly at around 200-odd gigawatts of renewable power generation. So definitely, investments on that front will continue for the next many years, and we'll be -- we'll keep on supplying cables to that opportunity.
The next question is from the line of Vidit Trivedi from Asian Market Securities.
Congratulations on the great set of numbers. Most of the questions have been answered. I just wanted to know what's the capacity utilization during the quarter and over the whole year? And any comments on the entry of new players and any product launch in the FMEG segment?
Sure, Vidit. So as far as capacity utilization is concerned, at a yearly level, we are somewhere between 70% to 80% utilization rate. Quarter 4, obviously, the utilization goes up because that is the quarter where we will see the maximum demand. So we will be north of 80% for the quarter. But on a yearly basis, we are between 70% to 80%. As far as the entry of new players is concerned, see, I mean, this is an industry which has done consistently well over the past 3 to 4 years, and we have very good visibility of it continuing to do very well in the near future.
The entry of new players just reaffirms our thought process that we -- this industry can continue to grow at a very good rate in the near -- on the longer term, and that is why it makes sense for newer players to look at -- and the larger players to look at this as an industry. The positive impact of this also is that we will see the best practices of those industry -- those players coming into this industry. And hopefully, the existing players can replicate that and improve on their businesses as well. What will also happen is that there will be an acceleration as far as the market share for organized players is concerned.
We still have a very large unorganized market in this sector. And with newer players, larger players, organized players coming in and a lot of improvement as far as the end customer is concerned and their demand for better quality products is concerned, which would all lead to much better acceleration as far as market share gains for organized players is concerned. Having said that, what we'll also do internally is, obviously, we'll double down on our execution. That is something which is a part of our Project Spring guidance.
We have the experience of Project Leap with us. We know how or how to do the execution on the ground. Within Project Spring, there are multiple areas of focus that we have charted out for us. We are looking on capturing the various white spaces which are still there within the country. We are also working very deeply with our distributors so as to help them generate much more business. We will help them generate more leads so that they can reach those demand centers that can -- and can supply products to those geographies or to sectors where probably they are not as much present right now.
On the institutional sales front, we are also setting up 5 different verticals, which will be focusing on 5 different sectors which are generating the demand. And that will allow us to not lose a single opportunity as far as all those sectors are concerned. So all of this are in place, and we expect that for larger players like us with established brand, established product portfolio, we'll continue to see very good demand, and we expect to continue to gain market share, much aligned with our Project Spring guidance.
So that was helpful. Any new product launches in the FMEG segment?
No, we are not looking at any new product launches in the near future.
The next question is from the line of Shrinidhi Karlekar from HSBC.
Chirayu, may I ask how much of your business in financial year '25 came from RDSS-related projects, both cable supply as well as EPC?
So on the EPC front, Shrinidhi, you can assume the entire sales -- largely the entire sales that we did for the year was from the RDSS project scheme-related awards. Roughly around 40% of those orders have cable component. So that is the kind of cable part that will -- that sales that would have done through the RDSS orders.
Right. And are you seeing incrementally opportunity from RDSS-related project moderating? I'm talking beyond FY '26. I guess, '26, you have order backlog already strong, but how should we think beyond '26?
So as of now, Shrinidhi, the RDSS scheme is up till FY '26 and orders and our tenders for various projects under that scheme are continuously awarded. So we are looking at that for future, and we'll have to wait and see if that scheme is extended by the government. And if it happens, obviously, then we'll participate in that scheme going ahead.
Understood. And last one, I really want to understand your significantly superior margin profile. If you look at your close peers, it appears like you have at least 5% to 6% higher margins. So would it be possible to throw some light in terms of how would you attribute the superior margins to pricing, mix, related scale, those factors and your own efficiencies?
Shrinidhi, I am assuming you're referring to the entire Cables and Wires segment over here?
So if I just look at your cable margins -- cable and wire margin versus #2 player, #3 player, #4 player, it appears you are 5 percentage point margin higher on EBITDA. I want to understand how would you internally think is it how much is pricing led, how much is mix led, how much is scale related procurement efficiencies, those kind of -- how would you attribute that?
So Shrinidhi, it will be a mix of all the reasons that you've mentioned. Definitely, one of the reasons is the business mix that we have, cables versus wires, and the margins that we make on those products. The pricing of our products is relatively higher as compared to the other players in the industry, about 2% to 3% on the cable side, 4% to 5% on the wire side, and that definitely helps as far as margin improvement is concerned. The other thing is even on our exports business, the margins that we make are relatively much superior as compared to what our peers make on their exports business. So that definitely helps.
The other part is also the mix within the domestic cables, so HDC versus LDC cables. LDC cables is a better margin business, and we have a relatively better mix of those product sales within our domestic cable sales, and that also helps us in terms of the relatively superior margin that we make in the Cables and Wires segment.
We will now -- we will take that as the last question. I would now like to hand the conference over to Mr. Gandharv Tongia for closing comments.
Thanks a lot, everyone, for attending the call, and thanks a lot for supporting us in our growth journey. We hope you will be working continuously together going ahead. At the company level, we are very confident of the continued long-term growth, which is possible in this industry and the kind of growth that we are targeting for the company. And we'll be very happy if we'll take this journey together. Thanks a lot, and take care.
On behalf of Polycab India Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.