POLYCABNSEQ4 FY2022May 18, 2022

Polycab India Limited

8,594words
91turns
9analyst exchanges
4executives
Management on call
Inder Jaisinghani
CHAIRMAN AND MANAGING DIRECTOR
Gandharv Tongia
CHIEF FINANCIAL OFFICER - POLYCAB INDIA LIMITED
Chintan Jajal
HEAD INVESTOR RELATIONS - POLYCAB INDIA LIMITED
Inder Jaisinghani And Mr. Chintan Jajal
Head Investor Relations on the
Key numbers — 40 extracted
35%
ion. Moving onto slide 4. For the quarter ended 31 March 2022, our consolidated revenue grew by 35% YoY on the back of healthy demand environment despite sharp inflation, coupled with strong execut
125bps
ts remain quite elevated I am happy to share that EBITDA margins improved sequentially by about 125bps touching 12%, led by better operating leverage and price hikes. Other expenses and other income a
12%
e elevated I am happy to share that EBITDA margins improved sequentially by about 125bps touching 12%, led by better operating leverage and price hikes. Other expenses and other income as % of sales
Rs 4.3 billion
nance Costs have been provided on Slide 13 of our earnings presentation. Our Profit Before Tax at Rs 4.3 billion increased by 17% while Adjusted Profit After Tax at Rs 3.2 billion increased by 20% YoY, respecti
17%
ed on Slide 13 of our earnings presentation. Our Profit Before Tax at Rs 4.3 billion increased by 17% while Adjusted Profit After Tax at Rs 3.2 billion increased by 20% YoY, respectively. On slide
Rs 3.2 billion
tion. Our Profit Before Tax at Rs 4.3 billion increased by 17% while Adjusted Profit After Tax at Rs 3.2 billion increased by 20% YoY, respectively. On slide 5, for the full year ended 31st March 2022, our reve
20%
at Rs 4.3 billion increased by 17% while Adjusted Profit After Tax at Rs 3.2 billion increased by 20% YoY, respectively. On slide 5, for the full year ended 31st March 2022, our revenue grew strongly
39%
, respectively. On slide 5, for the full year ended 31st March 2022, our revenue grew strongly by 39% YoY despite the two waves of pandemic and unprecedented inflation. EBITDA was up by 14% with 10
14%
rongly by 39% YoY despite the two waves of pandemic and unprecedented inflation. EBITDA was up by 14% with 10.3% margin. Adjusted PAT also grew by 14 YoY. It was a year full of challenges, but we a
10.3%
9% YoY despite the two waves of pandemic and unprecedented inflation. EBITDA was up by 14% with 10.3% margin. Adjusted PAT also grew by 14 YoY. It was a year full of challenges, but we achieved sever
Rs 120
ull of challenges, but we achieved several significant milestones. Our overall top-line surpassed Rs 120 bn clocking 17% CAGR in last 5 years. Exports is inching towards becoming a sustainable Rs 10 bn
Rs 10
ed Rs 120 bn clocking 17% CAGR in last 5 years. Exports is inching towards becoming a sustainable Rs 10 bn business. Polycab is the largest exporter of cables and wires in India. FMEG is now a Rs 12 bn
Advertisement
Guidance — 20 items
Gandharv Tongia
opening
“While we do not anticipate it to be any more challenging in B2B segment, we will remain watchful of consumer sentiment and how it plays out for B2C categories.”
Gandharv Tongia
opening
“Our overall top-line surpassed Rs 120 bn clocking 17% CAGR in last 5 years.”
Gandharv Tongia
opening
“or TANFINET as a Master System Integrator to implement the BharatNet Phase-II project and provide end-to-end connectivity with high-speed bandwidth using Optical Fibre Cables in over 3,000 Gram Panchayats in 75 blocks across 9 districts of the state, at a cost of about Rs 5 bn under the Master Service Agreement.”
Gandharv Tongia
opening
“The revenue of this project will be accrued as per execution timelines over the next few years.”
Gandharv Tongia
opening
“However, we are committed to achieving 12% annualized EBITDA margin in this business by FY26.”
Gandharv Tongia
opening
“A part of this cost will be compensated by monetisation of existing office in Mahim.”
Gandharv Tongia
opening
“Project Leap - our flagship transformation project.”
Gandharv Tongia
opening
“Just to recap for everyone, Project Leap is a multiyear program that includes a range of strategic themes and initiatives focused on growth, profitability and long-term capability building for the organization across B2B and B2C businesses with a goal of achieving greater than Rs.200 billion or Rs.20,000 Crores sales by FY 2026.”
Gandharv Tongia
opening
“>90% of talent acquisition for critical roles was completed in FY22 while the balance will be done in coming quarters.”
Gandharv Tongia
opening
“Given the significant distribution and geographical overlap, this initiative will materially improve customer servicing as most of their B2B wires and cables requirements will be addressed by single point of contact.”
Risks & concerns — 10 flagged
Our strong performance in fiscal year 2022 was underpinned by the extraordinary efforts of our team to achieve new milestones even in one of the most uncertain environments.
— Inder Jaisinghani
On the contrary, inflation is now perhaps one major risk to the improving demand environment.
— Gandharv Tongia
Lastly but most importantly quality of wires and cables is paramount for health and safety and hence our customer segment which is largely mid or premium, do not want to risk it.
— Gandharv Tongia
Switches saw a decline due to supply challenges.
— Gandharv Tongia
On the industry basis, what is the kind of channel inventories that we are looking at, are they at optimum levels or lower, my question is from the point of view of volatile copper prices?
— Sonali Salgaonkar
On FMEG margins, this quarter of course there was some pressure of inflation by the same time we got into realignment because you know what got us to Rs.
— Gandharv Tongia
if you remember in the first half we faced bit of challenge on maintaining contribution as well as EBITDA margin but after that it has improved, Q3 was comparatively better than the first half and Q4 was better than Q3.
— Gandharv Tongia
On FMEG also it has been mixed bag, there was bit of pressure on contribution margin in the first half of the year but after that we have been able to take price hikes there as well.
— Gandharv Tongia
So, any sign on demand slowdown or down trading by customer in any other portfolio as of now?
— Atul Tiwari
No, there is some bit of inflationary challenges in few of the product categories but it is not broad based in fact if you are available if your product is between specification and requirements of the customer, practically there is no challenge on demand.
— Gandharv Tongia
Advertisement
Q&A — 9 exchanges
Q
Thank you and congratulations Gandharv for stellar performance. Few questions, first, can you outline what was the value and volume mix for Q4 and FY2022 for cable and wires and FMEG?
Gandharv Tongia
Thanks, Naval, thanks a lot for your compliment. If I talk about cable and wire, we can broadly say that around 25% of the total growth can be attributed to volume and balance for value and in FMEG it will be vary from product category to product category, but it would have similar trend there as well. Okay, second on your Project LEAP as you stated that in terms of your dealer distributor expansion of 12% odd and retail have climbed by 24%-25%, now I see that the major increase has come in Q4 because your corporate presentation of January suggest the same number of 4100, and 1,65,000 and now
Q
Good afternoon and congrats on a very good set of number, if you can give a breakup for wires and cables business in terms of ratio of how much is cables and how much is wires if you can give that break up in detail?
Gandharv Tongia
Sure, thanks Ravi for your compliment. Cable and wire broadly I would believe that we around in early 50s as far as cable is concerned and the balance is wire, in total basis if I give you a breakup of entire Rs. 12,000 Crores of topline around 58%-60% would be B2B and around 40% give and take, 1% or 2% point would be B2C. For use B2C, okay and majority of 40% the wire? Around 10% of our topline is FMEG which is fan, lights and other products and balance is wires. Okay and any difference in strategy between the growth in cables and wires I mean does that do we aim for higher growth in wires, s
Q
Thank you for the opportunity and congratulations on a great set of number, my first question is regarding the price hikes, would you be able to elaborate what is the quantum of price hikes that we have seen in FY2022 and particularly in Q4 and also any price hikes that we have taken from April 1 onwards?
Gandharv Tongia
Thanks Sonali for your compliment. If we talk about Q4, at the raw material product basket level, we witnessed inflation in mid-single digit and, more or less, the price hikes we have taken is in similar range and that is where you can see the contribution margin of March quarter is comparable with December quarter, so we have been able to pass almost all the input cost increases to our end customer in the current quarter. Sir and cumulative FY2022 and from April 1? The business model is that we try to re-calibrate our prices on a monthly rest after factoring two data points, one is change in
Q
Good afternoon and congratulations for good result. My top two questions here, first is on the FMEG portfolio as you have mentioned the business have been looking at multi brand strategy positioning in the premium & mass premium and also launching the Etira for the economy segment, so as a company in the next 18 months given that there is inflationary headwind could be risk of down trading, how should one look at where would be the incremental focus in the near term and are you seeing any potential headwinds in terms of demand softness because of inflationary impact near term softness in the r
Gandharv Tongia
Sure, great question Renu. I have Chintan also on the call who is our Head Investor Relations, so I will request him to participate in the call, so Chintan take this one. I think our strategy in FMEG is really to cover all the price points. So what we aim to do is straddle across the price pyramid, across price spectrums. If you remember, our portfolio is largely focused more on the mid premium space and over the last few years what we were trying to do is increase the share of premium products. So in various categories, if I pick up fans for example, the share of premium fans is increasing. E
Q
Thank you and congratulations for the performance given the challenges. Just three questions Gandharv, one is on the cash usage. I think I am sure that the senior leadership is looking at that number and the cash flows are increasing year-on-year, you already have 1100 Crores, I am thinking you will have another Rs. 8 billion to Rs. 10 billion next year as well given what growth we are talking about, you alluded that you will spend, you will look at new categories to get into or some kind of a M&A, can you throw some more color on this? That is the first question. Secondly, anything on the FME
Gandharv Tongia
On M&A when we embarked on this Project LEAP, we felt that we have to do several things but what we decided is we will split the entire project into 24 work streams and then we picked up few work streams as year one priority than few work streams for a year two priority and so on. M&A and evaluation of adjacent product categories we decided we will take to up in the second year and as the embark on the second year of project I expect by September quarter, we should be able to give additional color what we should be doing but you are absolutely right that business is generating fair amount of c
Q
Congratulations for a great set of number. Just two questions, firstly, you said that the volume growth is 25% of the growth of this year, so 40% was the revenue growth of wires and cables, so kind of implies 10% volume growth, this seems kind of underwhelming considering in the major building material players and I think these players are seeing by 20% volume growth for this year given the real estate, so just wanted to understand why has been the volume growth low and any reason for this and do you expect this to improve going from here?
Gandharv Tongia
The volume growth cannot be directly linked with the real estate, our products are introduced at different phases of the construction and that is why its not apple-to-apple comparison, as far as future is concerned, as I mentioned a while back to another participant that we are inching towards Rs. 20,000 Crores of topline by FY2026 and we will continue to out pace the industry growth. Okay and just lastly wanted to understand on the payable days, so whatever gains we have achieved from reduction in inventory days and receivable days we have given that away by declining payable days so what has
Q
Thank you for taking my question, my first question is on the FMEG, when we look at last five quarters to six quarters pretty much stuck in the topline of 340 Crores to 350 Crores on an average when I look at your annualized number the industry saw last year a huge pent up, our growth is just about 21% and a I am assuming there must not be any or let us say very less volume growth in that to be honest, though you started saying that volume growth is in the double digit even in FMEG, so that is what adding up given what are the consumer companies are saying minimum category price hike is in the
Gandharv Tongia
Yes, you are absolutely right, your observation is correct, our business underwent the alignment exercise to improve sales force efficacy as well as to achieve the execution synergies which has hampered temporarily our growth, we have also identified the need to change the overall operation model because what has got us to Rs. 1000 Crores will not necessarily take us to say just throwing a number to Rs 5000 Crores and we also had fair amount of change at the leadership level in our B2C business but at the same time I must acknowledge this is momentary from the next quarter number and later in
Q
Thanks for the opportunity, so on the Etira brand basically if we see most of the durable companies they operate with one brand only considering limited surplus for brand building activities and all the variants be it economy, be it price or even the premium are introduced with the same brand itself, so why we have gone ahead with basically new brand Etira itself at the low end of the market and also will Polycab and Etira brand will both operate in the same market then there is a risk of cannibalization or will they operate in completely different geographies, so what is the plan on Etira bra
Gandharv Tongia
Let me give you a perspective. We have onboarded Interbrand to conduct a brand study for us we are also working with Ogilvy on the marketing side. They are marketing agency for us. And when we were going through the product portfolio optimization exercise, we realized that in few of the product segments we do not have product available at the right price points or at all the price points, that is where we thought of Etira. Etira is slightly different product with slightly different products specification to meet the requirements to the customers who are cost conscious with out compromising off
Q
Thank you everyone for taking out time and attending this call. We would be happy to attend your questions, you can always reach out to me or Chintan or you can write to our investor.relations@polycab.com. Thank you for your confidence in us, take care. Bye.
Management
Speaking time
Gandharv Tongia
36
Moderator
11
Sonali Salgaonkar
7
Naval Seth
6
Ravi Swaminathan
6
Achal Lohade
6
Rahul Agarwal
4
Renu Baid
3
Atul Tiwari
3
Chetan Gindodia
3
Advertisement
Opening remarks
Gandharv Tongia
Thank you operator. Good afternoon, everyone and thank you for joining us. I hope you all are staying healthy and safe. I am Gandharv Tongia, CFO at Polycab India Limited. On this call, we shall discuss the Q4 FY2022 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 investor relations page of our website. It can also be downloaded through the link or QR code on slide 9 of earnings presentation. Joining me today from the management team, we have our Chairman and Managing Director – Mr. Inder Jaisinghani and Mr. Chintan Jajal – Head Investor Relations on the conference call. Let me now turn the call over to Inder bhai for his comments.
Inder Jaisinghani
Good afternoon, everyone. Our strong performance in fiscal year 2022 was underpinned by the extraordinary efforts of our team to achieve new milestones even in one of the most uncertain environments. We delivered accelerated business growth, record free cash flow, healthy returns on capital and market-leading shareholder returns. We will champion our renewed purpose of innovating for a brighter living. Our “i-POWER” values will guide our thoughts and actions which will help us create long term sustainable value for all stakeholders and enrich the lives of everyone connected with Polycab. I now request Gandharv to take you through our earnings presentation.
Gandharv Tongia
Thank you Inder bhai. I think overall business environment has remained quite supportive in Q4 despite the sharp inflation. Demand across most segments remained healthy. Macro indicators such as GST collections, e-way bills are at new highs while other indicator like IIP, core industries index, consumer sentiment index amongst other are trending up. Government initiatives and reforms are certainly helping and even capacity utilization across most private industries are at good levels. Fresh capex announcements are at multi- decade high. Push towards transitioning to a renewable energy driven ecosystem globally is like never seen before. All of these are obviously good signs of an initiation of a long capital investment cycle which bodes well for our business. On the contrary, inflation is now perhaps one major risk to the improving demand environment. While we do not anticipate it to be any more challenging in B2B segment, we will remain watchful of consumer sentiment and how it plays
Advertisement
← All transcriptsPOLYCAB stock page →