Polycab: Stock with Highest Cable Industry Share

Polycab India Limited is among the largest manufacturers in the Wires and Cables Industry in India.

(A) About The Company

The company was founded by four Brothers – Girdhari T Jaisinghani, Inder T Jaisinghani, Ajay T Jaisinghani and Ramesh T Jaisinghani as a Private Limited Company – ‘Polycab Wires Private Limited’ on January 10, 1996 in Mumbai. Later, in the year 2018, The Polycab converted into a Public Limited Company and change the Company’s name to “Polycab India Limited” .

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(B) Journey of Polycab

polycab stock research update with inception story
Journey of Polycab India Limited


(C) Family Structure

who owns polycab India Ltd
Polycab – Family Structure

*Mr. Girdhari T. Jaisinghani, Mr. Inder T Jaisinghani, Mr. Ajay T Jaisinghani and Mr. Ramesh Jaisinghani are Brothers as well as the Founders of Polycab India Limited.

(D) Executive Management

(i) Mr. Inder T. Jaisinghani – Chairman & Managing Director

Mr. Inder Jaisighani is the one of the Founders of Polycab India Limited and the current Charman and Managing Director of the company. He has been working with the Company since its inception. He was 15 years old, when his Father Thakurdas Jaisinghani passed away. It was 1968 and his Mother asked him to quit his studies and take over the Family Business started by his Father. He was in the Secondary School at that time.

His Father ran a small Hardware and Electric Store in Mumbai, named – “Sind Electric Stores”, which sold Fans, Lights, Switches and Wires. Fortunately, he was not alone when he took over his Father’s Business. His elder Brothers Girdhari and Ajay, and his younger brother Ramesh teamed up to scale up the Family Business. He and his brothers ran the store and experimented with making Wires & Cables in Mumbai.

But their Success story began in the year 1983, when they started a Firm named “Polycab” to manufacture Electrical Goods at a large scale in Gujarat. Mr. Inder has extensive experience of more than 40 years. He worked in different areas of Strategy & Planning, Administration & Management, Sales & Marketing, Governance, Operations and other support services.

Age of Mr. Inder is 65 years.

(ii) Mr. Ajay T. Jaisinghani – Whole-time Director

Mr. Ajay is the elder Brother of Mr. Inder Jaisinghani and is also one of the Founders of Polycab India. Currently, he is the Whole-time Director in Polycab India. He has a Secondary School Certificate and vast experience of more than 40 years in working different Areas – Sales, Marketing, Production and other Support Services. Age of Mr. Ajay is 67 years. He inducted into the Board of the company in 2007.

(iii) Mr. Ramesh T. Jaisinghani- Whole-time Director

Mr. Ramesh is also one of the Founders of the Company. He is the younger brother of Mr. Inder and and Ajay Jaisinghani. He has been on the Boards since 10 January 1996. Mr. Ramesh Jaisinghani has a Secondary School Certificate. Mr. He worked in different areas of Administration & Management, Governance, Operations and other support services and has played a major role in leadership of the Company. Age of Mr. Ramesh is 62 years.

Other Family Members Involved In The Business

(i) Mr. Bharat Jaisinghani – Director – FMEG Business (Not board Member)

Mr. Bharat Jaisinghani is the Son of Mr. Ajay Jaisinghsni. He is the Director – FMEG Business of Polycab India since October 16, 2018. He holds a Master’s Degree in Operations Management from the University of Manchester. Mr. Bharat joined the Company on January 1, 2012. He also has an experience of working in different areas of Sales, Marketing, Production and other Support Services and has played a key Leadership role in the Company.

(ii) Mr. Nikhil Jaisinghani – Director – LDC Business (Not board Member)

Mr. Nikhil Jaisinghani is the son of Mr. Ramesh Jaisinghani and the Director – Light Duty Cables (LDC) Business of the Company since October 16, 2018. He has a Master’s Degree in Business Administration (MBA) from Kellogg School of Management, Northwestern University, Illinois, USA.  He joined his Family Business on January 1, 2012.

(iii) Mr. Kunal Jaisighani – Head Agri Products

Mr. Kunal is the son of Mr. Inder Jaisinghani. Currently, he is the Head – Agri Products of the Company since October 16, 2018.  He holds a Degree in Business Management Studies from University of Mumbai. He joined his Family Business on August 1, 2015. Mr. Kunal has an experience in Factory Operations, MIS and Pricing.

(E) Shareholding Pattern

polycab stock research update with shareholding detail
Polycab India – Shareholding Pattern as on 31.Mar.2020
polycab stock research update with key promoter shareholders
polycab stock research update with key public shareholders

(F) Product Categorization

(i) Wires And Cables Segment

Polycab India Limited manufactures and sells a diverse range of Wires and Cables under the Brand “Polycab” and its key Products in the Wires and Cables Segment are Power Cables, Control Cables,  Instrumentation Cables,  Solar Cables,  Building Wires,  Flexible Cables,  Flexible/single Multicore Cables,  Communication Cables and Others including Welding Cables, Submersible Flat and Round Cables, Rubber Cables, Overhead Conductors, Railway Signaling cables, Specialty Cables and Green Wires.

Polycab – Wires & Cables Segment

(ii) FMEG Segment

In the year 2014, Polycab diversified its offerings into the Fast Moving Electrical Goods (FMEG) segment. Company’s FMEG Products include Electric Fans, LED Lighting and Luminaires, Switches and Switchgears, Solar Products and Conduits and Accessories.

(a) Fans

(b) Lighting & Luminaries

Polycab India also provides a range of Lighting Solutions for everything from Roads to Bridges to Gardens to Walking and Jogging Tracks and many other Outdoor Lighting requirements.

Polycab – Lighting & Luminaries

(c) Switches

Polycab – Range of Switches

(d) Switchgears

The range of Switchegears provided by Polycab – MCB, Isolators, RCCB, RCBO, DB, MCB Changeover Switch and ACCL

(e) Solar

The range of Solar Products offered by Polycab consists of – Solar Panels, Solar Grid Tie Inverter, Off Grid Inverter, DC MCB, Cable Harness, Solar DC Cables and Solar DC Connectors.

(f) Conduit & Accessories

Company provides Polycab UPVC Conduits and Pipes in various sizes and different types of Concealed Boxes.

(g) Pumps

Polycab India also offers a range of different types of Pumps, which includes – Self Priming Monobloc Pumps, Centrifugal Monobloc Pumps, Jet Pumps, Borewell Submersible Pumps, and Domestic Openwell Submersible Pumps.

(h) Appliances

(i) Water Heaters – Instant Water Heaters and Storage Water Heaters

(ii) Iron – Steam Iron & Dry Iron

(iii) Coolers – Freezair, Airostar and Thunderstorm

(iii)  Engineering, Procurement & Construction (EPC)

In 2009, Polycab India  diversified into in the domain of turn-key contracting business Engineering, Procurement & Construction.

(G) Revenue Segmentation

Polycab India derives its major portion of Revenue from Wires & Cables Segment i.e. 84.44%. On the other hand, FMEG Segment contributes 9.57%, EPC contributes 5.37% and others contributes 0.61% to the Total Revenue of Polycab India in F.Y. 2019-20.

polycab stock research update with details of revenue segmentation
Polycab – Revenue Contribution as on 31. March. 2020

Geographical Classification

polycab stock research update with details of geographical revenue segments
Polycab India – Geographical Classification of Revenue as on 31. March.2020

During F.Y. 2019-20, Exports share in overall Revenue increased from 3.1% in FY19 to 12.3%. This significant growth in Exports is mainly on the account of partial execution of a large Export Order for a Project in Nigeria as well as increased traction seen in select developed Geographies.

(H) Manufacturing Facilities

The Company has 25 State-of-Art Manufacturing Facilities on the basis of its Products in India across 7 Locations –

  • Wires & Cables – Halol/Daman, Gujarat – having Annual Capacity of 3.7 Million kms.
  • Lighting & Luminaries – Chhani, Gujarat – Annual Capacity of manufacturing 18.2 Million Units.
  • Switches and Switchgears – Nashik, Maharashtra – having Annual Capacity of producing 7.2 Million Units.
  • Fans – Roorkee, Uttarakhand – Capacity of manufacturing 3.1 Million Units annually.
  • Copper Rods – Waghodia, Gujarat – having Annual Capacity of 2,25,000 Tonnes.

The company also has 30 Warehouses across 20 States and Union Territories.

(I) Cost Structure

polycab stock research update with cost structure
Polycab – Cost Structure as on 31.March.2020

(i) Advertisement Expenses

Indian Electrical and FMEG Industry’s Organized and Unorganized Spaces consists of various Large and Small Players. There is a tough competition among all these players. Thus, to stay in the competition all these players use various strategies. Advertisement and Branding is one of these strategies commonly used by the players.

As there very less difference in Products, players spend good amount on Advertising and promoting their products to show how different is their products from the other players of the Market. Polycab is following this strategy and has been spending on Digital Advertisements and Television Commercials from many years. Bollywood Actors like Paresh Rawal since 2014 for Wires; R Madhavan since 2018 for Fans; and Ayushmann Khurrana for Switchgear since 2019 are also associated with the company as Brand Endorsers.

polycab stock research update with analysis of advertisement costs
Polycab – Year-on-Year Advertisement Expenses

In FY20, Polycab’s Advertisement Cost is INR 108.68 Crores i.e. 1.23% of the Total Revenue of the Company.

(ii) Cost of Raw Material Consumed

Copper and Aluminum form as the key Raw Materials for the company. Due to various factors the prices of these Raw Materials fluctuate. Any volatility in the prices of these commodities, directly impact the cost of Raw Material consumed by the company.

Over the years, from FY15 to FY20, there is improvement in cost of raw material consumed as a % of sales. The commodity prices of copper & aluminium softened after FY18. Also, the cost improved in FY19 mainly due to change in sales mix and better sales price realisation.

Polycab stock research

(J) Group Structure

As on 31.December.2020, Polycab India has Four Subsidiaries within India and Two Subsidiaries Outside India. The company also has one Joint Venture in India.

polycab stock research update with growup structure
Polycab India – Group structure

* The Company holds 50% Shares in the Joint Venture – Ryker Base Private Limited as on 31. March.2020. The rest 50% Shares hold by Trafigura Pte Ltd., Singapore.

* The Board of Directors of the Company at its meeting held on May 02, 2020, considered and approved the acquisition of balance 50% Equity Shares held by Trafigura Pte Ltd., Singapore (‘Trafigura’) in Ryker Base Private Limited.

*Ryker Base Private Limited has now become the wholly-owned Subsidiary of the Company in December, 2020.

*For Ryker Plant, the prime objective is stability in supply of Copper as Raw Material. This Plant has capacity of 2x of current demand. Only 50% of the Capacity is currently being used. 50% additional capacity is available, which can be used by third party tie-ups or own demand increase.

(K) Distribution Network

Polycab India’s Distribution Network across India consists of over 4,000 Authorized Dealers and Distributors and also has 30 Warehouses across 20 States and Union Territories through which the Company reach its products to 1,50,000 plus Retail Outlets that connects the company to its Customers.
The Company also has strong Distribution Network in more than 40 Countries through which the Company exports its Products.

(i) By Products

polycab stock research update with distribution network

(ii) By Geography

Companies’ pan India presence without concentration in specific region provides it an additional benefit above all other players in the industry.

polycab stock research update with pan india presence

(L) Market Share

As per Industry and Company’s own estimates, Market Share of Polycab India Limited in the Organized Space of Wires & Cables Industry is 18-20% and the company also hold a Share of 12-13% in the Total Market of Wires & Cables Industry in F.Y. 2020.

Under Wires & Cables segment, key competitors of Polycab:

Other Segments Peers Group

FMEG consumer goods key players in india

(M) Operational Parameters

(i) Year-on-Year FMEG Revenue

The FMEG business started in F.Y.14, made Polycab one of the fastest-growing FMEG brands in India. Polycab’s FMEG Revenue has been steadily growing year-on-year registering a CAGR of about 41% during the past Four years.

polycab stock research
Polycab – Year-on-Year FMEG Revenue

(ii) Year-on-Year Wires & Cables Revenue

Company’s Wires & Cables Segment Revenue grew at a CAGR of 9.5% in last 4 years.

polycab stock research with analysis of wires and cables segment revenue
Polycab – Year-on-Year Wires & Cables Revenue

(iii) Year-on-Year EPC & Other Revenue

Polycab’s EPC Segment Revenue grew at 17% CAGR over the last 4 years.

polycab stock research update with key promoter shareholders
Polycab – Year-on-Year EPC Revenue

(iv) Year-on-Year Revenue Mix

polycab stock research with revenue mix
Polycab – Year-on-Year Revenue Mix

(N) Financial Parameters

(i) Nine Monthly Results

In the 9 Months (from Dec. 2019 to Dec. 2020), PAT Margin increased by 24.39%, i.e. from 8.24% in Dec. 2019 to 10.25% in Dec. 2020.

On the other hand, PBDT Margin increased to 13.92% in Dec 2020, showing growth of 10.13%.

polycab financial performance till December 2020

(ii) Net Sales

10 years net sales analysis of Polycab stock

(iii) Profit After Tax

polycab stock research with analysis of PAT for 10 years

(iv) Free Cash Flow

polycab stock research

*During the F.Y. 2018-19, Net Cash Inflow from Operations increased by INR 8,674 Million to INR 12,299 Million against INR 3,624 Million in the previous year 2018. The increase was mainly due to a large Advance received for an Export Order and increased LC acceptances in Trade Payables.

In the year F.Y. 2020, Net Cash Flow decreased mainly on account of – Significant advance received in FY19, which was adjusted in current year against Export, Income Tax refund received in FY19 related to earlier years INR 1,003 Million and increased use of Acceptances from F.Y. 2019 to fulfill the Working Capital Requirements.

(v) PBIDTM (%)

polycab profit analysis over last 10 years

(vi) PATM (%)

PAT margin analysis of Polycab stock

(vii) ROE (%)

Return analysis of Polycab India for stock investing

(viii) ROCE (%)

Return analysis of Polycab India for stock investing research

(ix) Debt-Equity Ratio

(x) Dividend Pay Out Ratio (%)

Polycab India is Debt-Free. The Company has shown a good Profit growth of 37% CAGR over the past 5 years. On the other hand, Net Sales of Polycab India grew at 13.4% CAGR. Also, the Company has been maintaining healthy ROCE and ROE over the past 5 years.

(O) Management Discussion & Concall Highlights

Financial Highlights

(i) Wires & Cables

  • In Quarter-3 – F.Y 2020-2021, Revenue of Cables & Wires increased by 6% Y-o-Y .
  • Overall exports revenue de-grew by 33% YoY on account of higher base of Dangote order (INR 140 crore in Q-3 F.Y. 21 vs. INR 320 crore in Q-3 F.Y. 20).
  • As per the Management, Excluding the above, Exports Revenue increased 29% YoY supported by increased demand from Australia, Asia and the UK.
  • Management also stated that Within domestic distribution channel sales, Wires grew faster than Cables.
  • On the other hand, Housing Wires continued its strong momentum led by distribution expansion pickup in renovation activity and gains from unorganized Segment.
  • OFC business remained sluggish. However, Company’s Special Cables division has seen good progress as the company received approvals for cables to be used in Defense, Railways and EVs.
  • Revenue Contribution Ratio between Wires & Cables was at 40:60 in the 3rd Quarter of 2021.
  • The company expects Market Share gain from Unorganized Segment, going forward.

(ii) FMEG Segment

  • On the other hand, Polycab FMEG Segment witnessed strong Revenue growth by 41% YoY on the back of buoyant Consumer Demand, Distribution Expansion, better Product Mix and Pricing Actions.
  • Also, FMEG contribution to overall sales increased to 10.8% in Q-3, F.Y. 202, across all Categories and Regions.
  • Fans grew strongly gaining leadership position in few geographical clusters.
  • On the other hand, Overall demand for Lighting Products remained upbeat led by Festive Season. Switches, Switchgears and Pumps also posted healthy growth.
  • Also FMEG segment EBIT Margin stood at 5.9% and 4.7% in Q-3 and 9 Month F.Y. 2021, respectively.

(ii) EPC & Others

  • EPC Segment’s Revenues sharply declined by 47% YoY.
  • On the other hand, Total income and segmental EBIT in Q-3, F.Y. 2020-21declined by 53% YoY and 71% YoY, respectively.
  • Annual sustainable Operating Margin in this business is expected to be in high single Digit over mid to long term.

Outlook & Other Key Highlights

  • B2C contribution in topline increased to 40% (from earlier 30%).
  • All the Raw Material Prices increased very significantly in the last three months, between September to December quarter. Copper and Aluminium, both increased almost by 15%, and PVC has increased almost by 50%. Calibrated Price action taken by the company is expected to offset the Price increase.
  • Launch of premium IoT based products under the Brand Name ‘HOHM’ in FMEG segment, which will be available in Top 10 Cities.
  • Polycab India has also launched several Consumer Electrical Accessories, New Range of economy Premium Fans and several differentiated Products across categories during the Quarter-3.
  • On the distribution side, Polycab is taking significant leaps. As of December 2020, Company has over 4,000 Authorized Dealers and Distributors catering to over 150,000 Retail Outlets.
  • Also, over the years, the company’s exposure to metro cities reduced from 60% to 45%.
  • Ryker Base Private Limited has now become the wholly-owned Subsidiary of the Company, which earlier used to be a Joint Venture.
  • For Ryker plant, the prime objective is stability in supply of Copper as Raw Material. It may ensure that backward integration will help the company in bringing operational efficiencies as well as availability of Raw Materials. This Plant has capacity of 2x of current demand. Only 50% of the capacity is currently being used. 50% additional capacity is available, which can be used by third party tie-ups or own demand increase.

(P) Growth Opportunities

(i) Diversified Portfolio of Products and Lines of Business

The Company has a diverse Portfolio of offerings and is present in almost all segments of Indian Electrical Industry. Polycab has three lines of Business – Wires & Cables, Fast Moving Electrical Goods (FMEG) and Engineering, Procurement & Construction (EPC).

The company provides its products in B2C as well as B2B segments. Company’s wide distribution network & brand recall allows to launch new product categories. Moreover, diversified product segments ensure balanced performance.

(ii) Increase In Share of Organized Sector

Industry estimates show a transition of the Indian Cables and Wires Industry away from the Unorganized Space with small Players towards the Organized Sector comprising Pan-India Branded Players. This is because the branded market players across the varied segments spend on technology enhancement as well as the marketing & branding activities.

(iii) Growing Distribution Network

The Company continued to aggressively pursue its Dealer Expansion Strategy – To discontinue some Smaller Dealers and to focus instead on Larger Distributors who in turn would also cater to these Smaller Dealers. The emphasis is on deepening Company’s presence in existing Markets and penetrating into newer Geographies across India. As per management, Polycab increased its dealers network from 3500 in March 2020 to over 4000 till December 2020.

(iv) Intensifying Exports

The company has been receiving Global Certification of Products for Exports and incorporating subsidiaries overseas. Polycab is also venturing into Eastern Africa, Russia as well as South Asian Countries. This will increase the Export Revenue of the Company and will help the Company in strengthening its position and grabbing market share in the overseas market.

In fact, increase in exports by Polycab will strengthen its wires & cables segment.

(Q) Risk/Concerns

(i) Fluctuations in Raw Material Prices

Fluctuations in Raw Material Prices pose a key challenge to the Cable and Wires Industry. Realization and Profitability depend on Copper and Aluminium commodity prices.

(ii) Disruption In Supply of Primary Raw Materials

Supply Chain of the Company has got affected due to this Covid-19 Pandemic. Disruptions in the Supply of primary Raw Materials like Copper, Aluminium, Steel and PVC Compounds may negatively impact the business of the Company.

(iii) Increasing Competition

Due to less Entry barriers, the number of organized and unorganized Players increased in the Electrical Industry.

Conclusion

Polycab holds the highest market share in wires & cables industry in India. The company’s key strength is its wide expanding distribution network.
Moreover, the company’s financial performance is also quite strong & retaining over the years. The major factor impacting company’s performance is the fluctuation is input prices. The ability of the company to retain margins as well as return ratios during all fluctuation cycles in the past, highlights its strong operating parameters.

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References:  Annual Reports, News Publications, Investor Presentations, Corporate Announcements, Management Discussions, Analyst Meets & Management Interviews, Industry’s Publications.

Disclaimer: The report only represents personal opinions and views of the author. No part of the report should be considered as recommendation for buying/selling any stock. Thus, the report & references mentioned are only for the information of the readers about the industry stated.


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